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Full text of "Nigerian intergovernmental financial relationships : from independence to the 1966 coups d'etat"

NIGB;RIAN INTERGOVERNIEl'TAL FIMAMCIAL RELATION.SIIIPr; 
— FROM ILDEPEtlDENCE TO THE 1966 COUPS D'ETAT 

26^-67 ) 

Walter L. Ness, Jr. 



rfce!ve:o 
UN 26 1967 






Dewey 
^Vss. INST, r,, 




Introduction 

A substantial part of the exercise of political art centers 
around the division of the tax burden and allocation of public expend- 
iture among the various income groups, occupational classes, geograph- 
ical areas, and ethnic groups comprising a nation. Unsatisfactory 
performance of this task may lead to pressures for a change in govern- 
ment or for a change in the form of government by democratic or violent 
means. This paper will examine (1) the financial federal structure of 
Nigeria to see what considerations have determined the structure of 
public finance in that country and (2) how the use and manipulation of 
that structure have affected the expansion of expenditure by the Federal 
Government and four Regional Governments of that African nation. Our 
primary interest will be in the period of official African rule^ from 
Independence as of October 1, I960, to the military coups in 1966» 
Nigeria entered nationhood with political power centered in three 
political parties, each being preeminent in one regions the Northern 
Peoples' Congress in the North, the Action Group in the West and the 
National Council of Nigeria and the Cameroons in the East. The dominant 
people of each region differed from the major groups of the others in 
language, religion, stages of economic and educational development, 
degree of centralization in society, etc. Regional leaders were fre- 
quently fearful of risking their political fortunes in the naw national 
government where relationships and dominance were less assured than in 



1752244 



their seemingly secure regional fortresses. In addition, in drawing up 
a national constitution. Regional Governraents were granted substantial 
powers while the Federal Government was weaker than in most other 
African nations. The political process that led to Nigerian nationhood 
is described in books by Coleman and Schwarz. The revenue system that 
developed in Nigeria was, of course, a function of these political forces. 
The best description of the evolution of the Nigerian intergovernmental 
financial relationships before Independence is given in Okigbo's recent 
book. 

In the first section of this paper, we shall examine the fiscal 
structure which Nigeria had inherited and achieved at the time of 
Independence. The structure of the financial relationships between the 
Federal and Regional governments was based on the recommendations of the 
Raisman Commission and was given in the Nigerian Independence Constitu- 
tion, Although the emphasis of this paper will be on the Federal-Regional 
relationships, a brief description of the financial relationships of the 
Northern Regional government and its Native Authorities will also be 
given to illustrate the financial status of local government in Nigeria, 



1 
James S„ Coleman, Nigeria? Background to Nationalism , University 

of California, Berkeley and Los Angeles^ -1958 ; and FoA,0, Schwarz, Jr,, 

Nigeria; The Tribes. The Nation, or the Race , M„I.T. Press, Cambridge, 

2 

Pius N, C, Okigbo^ Nigerian Public Finance „ Northwestern Univer- 
sity Press, Evanston, 1965, PP» 5~^9* 



QUALITY CONTROL M»„k 



Section II will examine the various points at which the financial 
structure as established in the Independence Constitution has been ques- 
tioned, at which the Constitution left considerable leeway for the work- 
ing out of details to the administrative and political processes, and at 
which ad hoc arrangements have been necessary. It will be shown that 
the points of contention which will be discussed are of sufficient num- 
ber and scope to vary the allocation of financial resources among the 
governments of the Federation considerably from the distribution set 
forth specifically in the Constitution, The importance of the resulting 
flexibility in the Nigerian financial system will be commented upon 
Section II also will describe the formation and proceedings of the 196^ 
Fiscal. Review Commission which was established to recommend upon the 
appropriateness of the constitutional provisions which allocated certain 
revenue sources among the governments. The desirability of such a com- 
mission in the Nigerian political context will be considered as will the 
Commission's recommendations. Section III will discuss what has happened 
to each government's financial position in the post™ Independence period. 
Noteworthy trends will be discussed. Finally, Section IV will present a 
brief overview of how the Nigerian intergovernmental financial relation- 
ships might be vie-wed from a systems approach. 



I, The Fiscal Structure at Independence 

(l) Federal-Regional Relationships 

The fiscal structure which Nigeria possessed upon becoming inde=- 
pendent on October 1, I960, had been in force since April„ 1959. It 
resulted from the adoption by the Constitutional Conference of the 
recommendations of the Raisman Commission, which had been appointed by 
the 1957 Constitutional Conference and had submitted its report in June^ 
19580 While the terms of reference and recommendations of the Com- 
mission were accepted by Nigerian representatives to the Constitutional 
Conferences, the Commission composition and the majority of Nigerian 
government civil service officials with whom the Commission met were 

expatriate. It is noteworthy that of the private persons apparently 

3 
consulted by the Commission, none were Nigerians, 

The Raisman Commission was the fourth in a series of postwar 

fiscal reports and commissions which adjusted and rationalized a federal 

financial structure for colonial Nigeria, The initial Regional 

Assemblies established under the Richards Constitution had no power to 

raise funds. The need to provide the Regional administrations with 

revenue sources which were under Regional control influenced the report 



3 
Colonial Office, Nigeria; Report of th e Fiscal Commission^ Her 

Majesty's Stationery Office, London, 1958, pp. 58-6I, 



of Sir Sidney Phillipson to (l) declare, where feasible, Regional 
revenue sources and (2) provide block grants to the Regional administra- 
tions from national revenues which were allocated on the principle of 
derivation. The principle of derivation which is mentioned throughout 
the literature on Nigerian financial arrangements may be defined as 
meaning that revenue should be allocated among the geographical regions 
of the nation according to the incidence of the tax upon the citizens of 
the regions. Usually this incidence has been determined in a rudimentary 
and partial equilibrium sense, with little or no consideration of second 
order effects, such as shifting, or upon the supply of effort. Fortun- 
ately, in those areas of incidence theory where our knowledge is least 
secure, e.g., the companies' income tax, use of the derivation principle 
has not been attempted. In addition, in the case of certain taxes such 
as export duties and mining royalties, the principle of derivation as 
applied in Nigeria refers to the geographical source of the product 
rather than to even the primary incidence of the taxo Derivation can be 
applied either by making a revenue source Regional or by assigning a 
revenue item collected by the Federal Government to the Regions based on 
statistical data concerning the regional derivation of the revenue , 

In 1951 Phillipson and Sir John Hicks comprised a Commission on 
Revenue Allocation which added "need" as a criterion for revenue alloca- 
tion among the central and Regional governments to the already firmly 
established principle of derivation. In this instance, "need" was 



sijnply determined by the number of adult male taxpayers in each Region » 
Specific-purpose grants to the Regions controlled by the central govern- 
ment were also to be used for purposes in the "national interest." 

Due to political developments, the Commission of Sir Louis Chick 
in 195^' was given terms of reference stressing the use of the principle 
of derivation to the "fullest degree compatible with meeting the reason- 
able needs of the Centre and each of the Regions c" Chick's findings 
under such restrictive terms of reference virtually eliminated the use 
uf the concept of "need" in revenue allocation except for discretionary 
grants which could be made to regional governments in times of financial 
distress. 

With this background of a fiscal system based almost solely on 
the principle of derivation ^ the aforementioned Raisman Commission acted 
under the following terms of reference: 



(a) To examine the present division of powers to levy tax- 
ation in the Federation of Nigeria and the present system of 
allocation of the revenue thereby derived in the light of: 

(i) experience of the system to date; 
(ii) the allocation of functions between the Governments 

in the Federation as agreed at the present Conference ; 
(iii) the desirability of securing that the maximum 

possible proportion of the income of Regional Gov- 
ernments should be within the exclusive power of 
those Governments to le-uy and collect p taking into 
account considerations of national and inter- 
Regional policy; 



Opo Cite o Po 1« 



(iv) in connection with (iii) above, the special problems 
in the field of indirect taxation as a result of the 
position of Lagos as Federal territory; 

(v) insofar as the independent revenues that can be 

secured for the various Governments are insufficient 
to provide not only for their immediate needs but 
also for a reasonable degree of expansion, and bear- 
ing in mind the Federal Government's own further 
needs, the desirability of allocating further 
Federal revenue in accordance with such arrangements 
as will best serve the overall interest of the 
Federation as a x^oleo 

(b) To consider what fiscal arrangements would be most 
appropriate for the Southern Cameroons, including whether 
that territory should be treated as a Region for the purposes 
of revenue allocation; and to advise on the extent to which 
additional financial assistance might be required to meet the 
immediate needs of that territory and to provide for a reason- 
able degree of expansion; and to indicate the form which this 
assistance should take^ 

(c) To consider the adequacy of present arrangements for 
coordination of loan policies, governmental borro^^^ings and 
capital issues, having regard to the decision to set up a 
Nigerian Central Bahlc and a Nigerian currency at an early 
dateo 

(d) To malce recommendations on the above matters, 

(e) Pending the submission of their final report, to consider 
as a matter of urgency the extent (if any) to which, as an 
interim measure, the provisions of sections 155 to l63 of 

the 195^ Constitution Order should be varied to reflect more 
accurately the principles to which they were designed to 
give effects 

(f) To be empowered, in making their interim report, to 
specify the date on which any proposed readjustments should 
come into effect. 

(g) To submit both interim and final reports to a resumed 
Conference . 



The task of the Raisman Coimnission can be considered to have been 
twofold. First J the Commission had to provide sufficient revenues to 
each of the governments to meet each government's financial requirements 
according to the criteria which will be discussed below. The amounts 
which would be required theoretically would have nothing to do with the 
specific revenue sources from which they came. Strict adherence to the 
principle of derivation would imply its use for all revenues. Use of 
the principle of derivation for only some revenue sources would imply 
the use of other allocation criteria as well. 

The second task of the commission would be to determine which 
level of government was best suited to administer and determine the 
rates of the various revenue sources. Criteria which might determine 
such decisions are cost, administrative effectiveness, need for national 
sovereignty, need for uniformity to promote the freedom of trade, desire 
for regional autonomy, etc. The financial results of these two exer- 
cises of determining revenue allocation and revenue collection 
responsibility would only coincide by chance c In effect, it was found 
by the Raisman Commission that the Regional governments required far 
more funds than could be provided by the revenue sources which it was 
desirable for them to control. Consequently, the Raisman Commission 
allocated to the Regions all or fixed portions of various revenue items 
for which legislation and administrative responsibility was to remain 
with the Federal Government,, Revenue sources for which the Regional 



Governments were responsible (not including revenue provided by their 
marketing boards) financed only 19 per cent of total regional expendit- 
ure in 1960/1 „ The foregoing situation was implicitly preferred to the 
other alternatives; 

(i) Complete autonomy of Regional and Federal Government 
finances which would imply an overabundance of funds for Federal 
expenditure responsibilities and an insufficiency for Regional 
responsibilities under the recommended division of collection 
responsibilities „ 

(ii) Transferring to the Regional Governments the responsi- 
bilities for legislation and administration of revenue sources for 
which the Federal Government is better suited „ 

(iii) Transferring expenditure responsibilities from the 
Regional to the Federal Government » 

Five principles were primary in determining how revenue sources 
were to be allocated among the then existing three regions and the 
Southern CameroonSo Below the strengths and failings of these prin- 
ciples are discussed s 

(i) Continuity o To reduce the financial resources of any gov- 
ernment below the level of existing services being provided was felt 
likely to cause more harm than to distribute funds so released to other 
governments which might have "higher priority" uses for themo Full 
acceptance of this principle would tend to force any new allocation of 



10 



revenue to be made from the growth of revenue sources above present 
levels. It also implies a quadratic tjrpe of utility function for each 
government wath the marginal utilities of revenue for each government at 
the present position being equals thus naving a loss of a unit of 
revenue from the initial position of one government more than offsetting 
the value of a gain of a unit by another government Adherence to the 
principle of continuity would encourage governments to spend as much as 
possible before the convening of any new fiscal review commission in 
order to bolster its future allocationo 

(ii) Derivationo The principle of derivation is related to the 
concept of benefit taxation, It is based on the principle that those 
who pay the taxes., at least from a geographical or regional point of 
vieWs, should receive the benefits o Absolute acceptance of such a con- 
cept denies the national government the power to effect inter-regional 
redistributions of income <, Few nations would be willing to nullify such 
a powers Adherence to the regional derivation principle could be cir- 
cumvented by Federal Government expenditure in patterns different from 
the Regional incidence of the taxes it collects „ Assuming acceptance of 
the derivation principle, its implementation runs into two pitfalls s 
(l) lack of agreement on the theoretical incidence of certain taxes,, a 
prime example being the companies- income tax^ and (2) inaccurate 
statistical data concerning ineidenceo For example,, the final destina- 
tion of many Nigerian imports is un]cnoTim at the time they pass through 



11 



customs and no reliable regional consumption statistics are available » 
The errors which might be made in attempting to apply strictly the 
principle of derivation could be expected to be substantial, 

(iii) Need , To define relative need is a precarious undertak- 
ing, especially in view of the lack of an accepted means of making inter- 
personal utility comparisons. To make the "need" criterion operational, 
a Fiscal Review Commission might either make a blanket evaluation of the 
financial requirements of each of the governments with only an intuitive 
justification or might select one or several proxy variables which could 
be used to indicate relative need. In fiscal discussions in Nigeria, 
mention of four indicators of relative need has been predominant: 

(a) Maximum Growth . If inaximization of Gross National 

Product is the primary goal, then need might be represented by 

existing levels of expenditure or some other criterion which 
would even further make available resources to governments of 
those regions which are relatively more advanced. It might be 
contended that pushing development faster in those areas where it 
already is occurring will lead to the greatest benefits for the 
nation as a whole. High-return projects are expected to exist 
primarily in those areas which already have been subject to some 
development. While the foregoing argument is frequently used to 
support greater allocations for the presently more developed 
areas, it remains possible that the greatest economic returns 



12 



would be found in projects in the less developed regions and 
therefore that current expenditures are an inaccurate indicator 
of the future allocations which should be made in order to maxim- 
ize national economic growth. 

(b) Balanced Growth. It is implied by this indicator that 
development from an initial position for all regions at the same 
rate is of equal benefit. Such an argument would lead to either 
the total or capital expenditure program of each government to be 
expanded at the same rate. Allocations would thus be based on 
the existing levels of expenditure by each governraento Use of 
the balanced growth criterion based on 196^/5 total expenditure 
would lead to the following distribution of Regional revenues? 
North 31.9 per cent, East 32.6 per cent, West 27.3 per cent, and 
Mid-West 8,8 per cent, 

(c) Population, Acceptance of this variable implies that 
each government should be able to spend the same amount per 
capita* Each person in Nigeria would be entitled to the same 
benefits from his government irrespective of the amount of taxes 
he pays, investment opportunities, the existing level of services 
provided, etc. Pure use of the population criterion would lead to 
the following distribution of Regional revenues according to the 
1963 census; North 54.1 per cent, East 22.6 per cent, West 18,? 
per cent, and Mid-West ^^7 per cent. 



13 



(d) Minimum or Equal Standards . If the aim is the egalit- 
arian one that each region should provide similar standards of 
service to its citizens in certain or all fields of government 
endeavor 5 then the concentration of revenue allocation in poorer 
areas may be even greater than that indicated by population o For 
in order to be able to provide services on an equivalent per 
capita basis, capital investment would have to be made to provide 
the facilities and training of individuals necessary for the gov- 
ernment to furnish the services. The degree to which this allo- 
cation would be necessary will, of course^ depend on how far it 
is considered should services be equalized or the minimum stand- 
ards be achieved. The difference in government services and 
economic standards of the different sections of Nigeria is sub- 
stantial. The total Regional Government expenditure per capita 
in Northern Nigeria has been less than half that of the Eastern 
and Western Regions, In I962 there were over three times as many 
people per hospital bed in Northern Nigeria as in the other 
regions. The numbers of students in primary and secondary 
schools in the North as a percentage of the national total were 
11 per cent and 7 per cent respectively, although the I963 Census 
attributed over 50 per cent of the Nigerian population to the 
North. 



1^ 



(iv) Equal Efforts It would be considered unfair for one region 
to receive an allocation of revenues based on need if that region was 
unwilling to levy the taxes under its power at rates and with collection 
effort commensurate with those in force in the other regions „ Differ- 
ences in income tax and other regional tax rates are sometimes substan- 
tial, A few taxes have been levied by only one Region^ eog„„ the petrol 
purchase tax by the East* If equal effort were not a criterion for 
revenue allocation „ a region might attempt to obtain as much as possible 
from the Federal revenue allocation but keep its own taxes as light as 
possible. 

The extent to which the Raisman Commission relied upon each of 
the above criteria is indeterminate due to the nature of the report it 
submitted., Most were mentioned explicitly in passing in the Commission's 
report, but with no formal indication of the weight given to eacho The 
allocation of revenue sources as recommended by the Raisman Commission 
which Nigeria possessed at Independence can be summarized as follows? 

(i) Revenues collected and retained by tjje_Regiona]^_G overnments 
and the Federal Government wi th respect of Lagos; Personal income taxa- 
tion, produce sales taxp entertainment tax,, betting tax„ earnings and 
sales of regional government ministries and departments ^ licenses and 
fees for subjects of regional jurisdiction^ rent on regional government 
property, interest on regional government investments, etCo 



15 



(ii) Revenues collected and retained wholly by the Federal 
Government: Companies' income tax; beer, wine, and spirits import and 
excise duties ; 20 per cent of mining rents and royalties ; 70 per cent of 
general import duties; licenses and fees on subjects of federal juris- 
diction; earnings and sales of federal ministries and departments; rent 
of federal government property; interest on federal government invest- 
ments; revenue from post and telegraph and armed forces activities^ etc » 

(iii) Revenues collected by the Federal Government but allocated 
to the Regions and itself with respect to Lagos according to the prin- 
ciple of derivation : Tobacco import and excise duties; motor spirit and 
diesel oil import duties; export duties; 50 per cent of mining rents and 
royalties, 

(iv) Revenues collected by the Federal Government and allocated 
to the Regions in accordance with the Distributable Pool formula, i.e,. 
^lO per cent North 2k per cent West. 31 per cent E a st. 5 pej" cent South- 
ern Came roons ; 30 per cent of mining rents and royalties and 30 per cent 
of general import duties. 

In addition to these allocations, the Federal Government xras to 
be given responsibility over the raising of external debt. Both the 
Regions and the Federal Government retained the right to issue internal 
debt although responsibility for the banking system \<ras to be a matter 
of Federal jurisdiction. 



16 



(2) Rep:ional-Local Government Relationships 

While the focus of this paper is on Federal-Regional financial 
relationships in Nigeria^ the organization of local government finance 
cannot be ignored <, Local government organization is not dealt with in 
the Constltutiono There fore ^ it is a residual matter of Regional 
responslbilityo Local government is therefore vested with no jurisdic- 
tional powers by the Constltutiono All of its powers are delegated by 
acts of the Regional Governments „ Therefore j, uniformity as to the func- 
tions and finances of local government bodies in the various regions is 
not necessary nor is it prevalento Local government bodies have more 
responsibilities in the North where local government administration has 
an ancient tradition which long predates the English conquest o In con- 
trastp in the East there vras little formal local government administra- 
tion organized prior to the British colonizationo The relatively dif- 
ferent levels of activity by local governments in the various regions 
make it desirable to consider consolidated Regional-Local Government 
financial statements when comparing levels of Regional Government 
expenditure or tax collection effort. Otherwise,, for example „ compari- 
sons of Regional statements alone would understate both the level of 
government services being provided in the North and the taxation effort 
the North is making in the self-support of its own developments 



17 



Eliminating grants from Federal and Regional Governments to local 
authorities to avoid double counting,, the net consolidated regional 
recurrent revenues appear in Table 1 and net consolidated regional 
expenditures appear in Table 2 for 1960/l» 

The relationships between regional and local governments may be 
exemplified by a discussion of those existing between the Northern 
Nigerian government and its Native Authorities and Townships ^ These 
relal ionships may be discussed under four headings? income taxation^ 
grants „ borrowing , and investing, 

(A) Income Taxation,, Under the Ncrthern Nigeria Personal Tax 
Law of 1962 5 Native Authorities retain 8? l/2 per cent of the revenue 
they collect from the community and cattle taxes <, the form.s of personal 
taxation which affect the broad base cf taxpayers in Northern Nigeria-, 
TVie remaining 12 l/2 per cent of the revenue from these sources is paid 
by the Native Authorities to the Regional Government, The Native 
Authorities also retain 20 per cent of the ptersonal income tax collected 
by the Pay As You Earn system from Native Authority employees, 

(^) Grants , In any given year the Regional Government share of 
direct taxes is more than offset by grants it makes to local government 
bodieso One might ask why the grants cannot be abolished and the Native 
Authorities be all.owed to retain 100 per cent of the direct taxes„ 
Table 3 shows the net financial outcome in recent years if the Regional 
grants to Native Authorities and payments to the Regional Government cf 
shares of the community and cattle taxes had been eliminatedo 



18 



TABLE 1 
NET CONSOLIDATED REGIONAL RECURRENT REVENUES I96O/I 



Regional 

Local Authorities 

Total 



_No_rth 

L 17.6 m 
9.9 

27,5 



West 

L 20 ..7 m 
7.1 

27,8 



East 



L 16.7 m 
2.4 

19.1 



Source; Okigbo, P.. N. C., "Nigerian Public Finance," Northwestern 
University, Evanston, I965, Tables 6 and 10. 



TABLE 2 
NET CONSOLIDATED REGIONAL EXPENDITURES I96O/I 



North 



West 



East 



Recurrent; 


Regional 

Local 

Total 




L 16.3 m 


L 19.4 m 
6.4 
24.1 


L 13.,5 m 
2,8 




TSTT" 


Capital; 


Regional 

Local 

Total 




6.7 
_.. 3.4 


14.3 

14 

15.7 


^.9 
0.2 




10.1 


5.1 


GRAND TOTAL 






34.7 


39.8 


21, i| 


Source ; Okij 


gbc, 0^. cit. 


, Tables 


8 and 15 » 







19 



TABLE 3 

THE OFFSETTING NATURE OF NORTHERN REGIONAL 

GOVERNMENT' NATIVE AUTHORITY TRANSACTIONS 

(in I' millions) 

Net Native 

Native Authority Grants to Native Regional Govt, Authority, Se 

Financial Total Budget Sur- Authorities from Share of Commun ■- Generated Sur 

Year £ilL§_2r,J^Ci£i.tL -ClJ. .5S£i2!H.-L5°Xi.-_— ity & Catt le Taxes plus or Defic 

(2) (3) (1) - (2) + ( 

1 3 1-1 -0,^) 

l.'^ 1,1 -0 7 

1.^ 1.2 0.1 

1.6 0.8 0.1 

1.7 1.1 0.^ 
2,2 1.5* -0.2 
9.6 6.8 -0,2 





(1) 


1959/60 


-0 2 


1960/61 


-0.^(. 


1961/62 


0.3 


1962/63 


0.9 


1963/6^ 


15 


imate 196^1/65 


5 


TOTAL 


2.6 


*Actual 





Source: Northern Nigeria Local Government Yearbook I966 and various Northern 
Nigeria Accountant- General's Reports. 



20 



Several reasons may be offered in support of the retention of the 
present system or of some modification thereof. First, the grant system 
in theory allows greater control by the Regional Government of the 
finances and activities of the Native Authorities, The use of grants 
permits the Regional Government to ensure that Native Authorities ful- 
fill performance and accounting standards which are established by the 
Regional Government, Financially autonomous local government bodies 
might tend to become autonomous in policy to an extent deemed undesir- 
able by the Regional Government or be plagued with uncontrolled corrup- 
tion. Secondly, the direct taxes which would be retained by the Native 
Authorities will become of lesser importance as the Nigerian economy 
develops. The Regional personal income tax will, apply to a larger por- 
tion of the population who will also have larger incomes as time passes 
while the potential for increasing the tax rates for those remaining 
under the community and cattle taxes will be quite limited. The finan- 
cial autonomy of Native Authorities in an expanding economy, if desired, 
would better be achieved by giving Native Authorities the same percent- 
age of the revenue collected from all forms of direct taxation rather 
than making the expanding revenue sources regional and the declining 
forms local. Thirdly, the grants-in-aid from the regional to local gov- 
erriments serve as a safety valve in adjusting the relative financial 
positions of the Regional and local governments. They can readily be 
expanded or contracted to meet special financial requirements of either 



21 



the Regional or local governments , Furthermore , they oan serve to 
effect the redistribution of finances among Native Authorities according 
to the principles of need and achievement, rather than basing Native 
Authority finance solely upon the principle of derivation. 

The mechanism for the review of Regional- local government finan- 
cial relationships in Northern Nigeria is not formally defined » This 
matter can be approached on an ad hoc basis for which the adjustment, 
abolition or creation of grants-in-aid may be the most effective tool, 
especially for matters that require prompt action. The alternative of a 
local government finances review commission was attempted in Northern 
Nigeria in 1963 = However, the approved findings of the Sowerby Report 
on local government finances have not yet been fully implemented. 

The nature of the grants-in-aid given by the Northern Nigerian 
government to Native Authorities and Townships is also of interest. 
The grants may be divided into two types s (i) those paid on the basis 
of a certain amount per person using the facility, per institution, or 
per trained member of staff and (ii) those which are reimbursements of a 
given percentage of approved expenditure. Both types of grants involve 
burdensome accounting procedures required in the claiming of the 



-^A detailed listing of the grants is given in the Northern 
Nigeria Local Government Yearbook 1966, Department of Local Government, 
Institute of Admini strati on j Ahmadee Bello University, Zarla, pp. ^6-52, 



22 



numerous available grants. The primary economic difference between the 
two tjrpes of grants arises from their differential impact on the alloca- 
tion of local government expenditures. The: second category of percent- 
age reimbursements will lead local government bodies to spend more funds 
on reimbursable items than would be done in the case of block grants 
being made to the Native Authorities since the marginal cost of addi- 
tional expenditures under percentage reimbursements to the Native 
Authorities is less than 100 per cent of the aggregate marginal cost 
(Marginal Cost = 100^ - the percentage reimbursed). The capacity to 
influence the local government decision-making process may be desirable. 
However, the creation of grants to date seems to have been an ad hoc 
process. That this is likely is evidenced by the fact that no capital 
projects in the top priority natural resources sector are presently per- 
centage reimbursement grant aided. Consequently, the grant system is in 
the anomalous position of offering a relative disincentive to capital 
projects in that sector considered along with education as being of top 
priority in the development of the Nigerian economy. The grant system 
is in great need of being rationalized, 

(C) Borrowing and Investing . Inevitably some Native Authorities 
find themselves in financial difficulties due to seasonal imbalances of 
revenue and expenditure, financial mismanagement , or civil insurrection. 
Native Authorities must obtain short-term funds to meet such situations., 
Prior to 1963* such short-term borrowing was done from commercial banks. 



23 



The wide differential between borrowing and lending rates of the commer- 
cial banks has led the Regional Government to offer itself to act as an 
intermediary for such operations,, Under the Surplus Funds Seposit 
Account scheme. Native Authorities deposit surplus funds with the gov- 
ernment and receive interest at a rate of 1 per cent below the Central 
Bank rediscount rate. Deposits can be withdrawn upon notice to the Min- 
istry of Finance, Native Authorities requiring additional funds borrow 
from the account at a rate equal to the Nigerian Central Bank rediscount 
rate 5 a rate substantially below that which is charged by the commercial 
banks. Applications by Native Authorities for loans from the account 
are approved by the Permanent Secretary of the Ministry of Finance after 
consideration by a committee of officials,, The government account thus 
provides effective interest rate competition with banks on deposits and 
provides easily the cheapest source of short-term credit available to 
local government bodies. If the use of the account for borrowing is 
made dependent upon Native Authorities having made deposits previously, 
this account would be expected either to shift most of the Native 
Authorities borrowing and lending activity from the banks to government 
or force the banks to change their borrowing and/or lending rates. 

Naturally, deposits and loans from the account will not always 
balance. Within a year, the fund balance will vary greatly, since Native 
Authorities have most of their revenue collected in the December to March 
period. Consequently, the Native Authorities as a whole may be creditors 



2h 



or debtors of the regional government. To date, deposits have always 
exceeded loans. In the financial year 196^/5 the net fund position 
ranged from a low of less than t,0,5"i in December to over t2.5m at the 
end of March, Therefore, the net effect of the account creation at a 
first order of approximation is an increase in the credit available to 
the Regional Government and a reduction in the credit available to the 
private sector or indirectly to the Federal Government through Native 
Authority bank deposits or purchases of Treasury Bills. 

Long-term borrowing by Native Authorities from the Regional Gov- 
ernment has been more limited. Three stages in borrowing may be dis- 
cerned. First, in the 1950 ' s and early 1960's the Regional Government 
and the Federal Government in some cases made loans available to Native 
Authorities for capital projects which were felt to be beyond the scope 
of the Native Authorities to finance on their own at the time of con- 
struction. Many of the loans outstanding were written off when the 
Regional Government took over responsibility for most water supplies and 
other formerly Native Authority responsibilities, The amount of such 
loans now outstanding is less than LI million. The accumulation of 
recurrent budget surpluses by many Native Authorities, the removal from 

local to regiona] responsibility of some of the largest capital projects, 
and other factors led to a period of little Regional loan assistance to 



Only the Kano and Katsina Town water supplies remain under 
Native Authority responsibility in Northern Nigeria. 



25 



the Native Authorities' capital development plans in the early 1960's. 
During this period of quasi-autonomyj Kano's Native Authority nego- 
tiated a loan for further extensions of its water supply from Barclays 
Overseas Development Corporation. Since the loan was from abroad, guar- 
antees by the Federal and Regional Governments were required » No fur- 
ther loans of this type have been negotiated, probably due to the high 
interest rate of 7 l/2 per cent per annum charged and the relatively 
short repajnnent period involved. 

Only recently has the problem risen to the fore that certain 
Native Authorities accumulate surpluses beyond their immediate needs 
while others are unable to finance reasonable and necessary capital 
expenditure programs. It has been suggested in the Sowerby Report on 
Local Government Finance in Northern Nigeria that the discrepancy 

between need and resources on the part of the Native Authorities be met 
by a capital loans pool for Native Authorities which would in fact allow 
the surplus Native Authority funds to be used to finance capital devel- 
opment in financially deficient Native Authorities, It seems likely 
that as time passes few Native Authorities would be able to contribute 
continuously to such a loans pool. All areas of Northern Nigeria are in 
need of vast development efforts „ Accumulating surpluses which would be 
used elsewhere could be a way of committing political suicide for even 
the most traditional Native Authorities, Certainly local government 
bodies will keep Small balances to even out unexpected fluctuations in 



26 



revenue and expenditure. However, such balances should be in relatively- 
liquid form such as the surplus funds account with the Regional Govern- 
ment, savings accounts with commercial banks, and Treasury Bills » Few 
Native Authorities will be able to continue the luxury of autonomy 
insured by the large accumulations of long-term foreign or domestic 
assets as are presently held by some Native Authorities, As of April 1, 
1965, it was estimated that Native Authorities held reserves of 
t? 1/2 m,'^ 

It would seem likely that the necessary growth of the proposed 
capital loans pool beyond what would be provided by interest payments, 
revolving of loans, and initial transfers of existing Native Authority 
investments and surplus fund account deposits would depend on the 
Regional Government providing annual loans or grants to the loans pool 
or on levies being made on the Native Authorities on the basis of Xd per 
taxpayer or Y per cent of their revenues as their annual contribution to 
the pool. Perhaps annual Regional contributions to enlarge the loans 
pool could replace the present burdensome recurrent grants system. 

A capital development loans pool would more effectively intro- 
duce "need" as a principle of allocation of finances among Native 
Authorities, Since Native Authority expenditure already requires the 
approval of the Minister for Local Government, a regionally controlled 



7 
OpoCit. This amount for reserves includes liquid as well as 



long-term assets, 



27 



capital loans fund would not significantly reduce local autonomy in bud- 
geting. Moreover, it might allow greater use of economic criteria for 
the selection of Native Authority development projects than is presently 
found. Nevertheless, the addition of another tier to the local govern- 
ment budgeting process might only result in further administrative 
delays in implementing Native Authority development programs rather than 
increased economic rationality. 

II. Fiscal Developments after Independence 

Section I has given the background for the fiscal arrangements 
between the Federal and Regional Governments at the time of Independence 
together -with a description of the current relationship between one 
Regional Government and its local government organizations » The present 
section will consider the problems which arose from the arrangements 
embodied in the Nigerian Constitution and from issues that were not 
foreseen in that document. Our discussion may be divided as follows; 

(i) implementation of the constitutional arrangements ; 

(ii) treatment of new revenue sources; 

(iii) Federal Government grants to the Regions; 

(iv) external and internal borrowing; 

(v) the 196^ review of the fiscal system; 

(vi) expenditure distribution; and 

(vii) asset holdings. 



28 



(l) Implementation of the Constitutional Provisions 

(A) Secession of t he Southe rn Cameroons . In a I96O plebiscite „ 
the Southern Cameroons decided to join the Cameroon Republic rather than 
remain as part of Nigeria. With its withdrawal, the provision awarding 
it 5 per cent of the Distributable Pool became obsolete. The Distribu- 
table Pool shares in the amended Article 135 of the Constitution were 
then set at North ^0/95ths, West 24/95ths, and East 3l/95ths, 

(B) Creation of the Mid-West State „ When the Mid-West state was 
created from part of the Western Region in 1963, constitutional provi- 
sion had to be made for an allocation from the Distributable Pool to the 
Mid-West. This was accomplished by reducing the West's share from 
2^/95 ths to 18/95 ths and giving the Mid-West a share of 6/95 ths. While 
it is obviously more expensive to run two governments than one, no 
allowance was made in the constitutional amendment. This may have been 
justified by the view that if a region was to be divided into two^ the 
people of that region should bear any additional burdens incurred by the 
division. While this argument might be applicable to the people of the 
Mid-West who voted for an independent region, it is of doubtful applica- 
bility to the people of the remaining Western Region who did not partic- 
ipate in the plebiscite, 

(C) Jurisdic tion over Taxes. Jurisdiction over various taxes and 
levies depends on whether the items concerned are specified on the 



29 



exclusive or concurrent lists of the Constitution or are specified else- 
where in specific clauses of the Constitution, No cases have been 
brought to the courts by the Regional or Federal Governments in this 
respect. However,, certain questions may be raised as to the appropriate- 
ness of Federal Government retention of television license revenue and 
the administrative arrangements for the allocation of stamp duty revenue,, 

Item 42 of the Exclusive Legislative List of the Nigerian Consti- 
tution gives the Federal Government exclusive legislative authority over 
"wireless „ broadcasting and television other than broadcasting or tele- 
vision provided by the Government of a Region," The question wVdch could 
be pursued is that if the only television available in a Region is pro- 
vided by the Regional Governmentj wouldn't the Regional Government have 
the authority to levy television license fees rather than the Federal 
Government? 

With respect to stamp duty revenue, matters covered by stamp 
tuties are spread among exclusively Federal, concurrent and Regional 
legislative jurisdictions,, For stamps impressed by Commissioners of 
Stamp Duties p direct allocations can be made to either Federal or 
Regional revenue. However, where postage stamps are used as is allowed 
by the law, the revenue goes to the Federal Government as the vendor of 
postage stamps no matter whether the object of the duty falls under 
Regional or Federal jurisdiction,. In compensation for this, administra- 
tive arrangements were made before Independence for L25,000 per annum to 



30 



be allocated among the Regions on a derivation basis. This amount has 
not been increased subsequently in spite of a vast increase in the 

regular stamp duties collectedo 

(D) Tin Royalty Payment Failure . With the opening of the Makeri 
Smelter near Jos in late 1961^ an administrative lapse led to the fail- 
ure of the Federal Government to pay the Northern Region its 50 per cent 
"region of origin" share of the tin royalty as well as the 30 per cent 
allocation to the Distributable Pool for all the regions „ Although 
acknowledgement of discovery of the error was long in forthcoming j, pay- 
ment of the amounts due (over t2m) was made promptly. This prompt pay- 
ment at a time of financial stringency for the Federal Government in 
1964/5 averted fear that the Federal Government might not be willing to 
carry out its constitutional obligations concerning the collection and 
payment of regional revenues. This administrative difficulty led to the 

observation that the Constitution provides no penalty (eog.^ an interest 
charge) for late payment of the Regional allocations of revenue „ 

(E) Consultation over Fed eral R evenues Allocated to th e Regions o 
It has been the practice of the Federal Government to consult with the 
Regions over changes in tax rates and exemptions for Federally collected 
taxes which are wholly allocable to the Regions; e^gc, alteration of the 
export duty on cattle hides. While failure to consult with the Regions 
might lead to unexpected changes in Regional budgetary positions, doing 
so often results in bureaucratic tieups and inaction in making desirable 



31 



rate changes. While consultation would seem necessary, it should be 
limited to those Regions which are significantly involved with the 
revenue source being questioned. 

The Regional budgets depend on Federal allocations of revenue 
for from 60 per cent to 80 per cent of their recurrent revenue, Conse- 
quently, accurate information concerning revenue estimates and prospects 
are most important for the Regional budgeting process. Without this 
information. Regional expenditure can be conservatively biased because 
of the great uncertainty concerning the next year's Federally collected 
revenues. Generally^ estimates of Federally collected revenue have not 
been made available to the Regions until the latter had reached a very 
late stage in their budgeting process. Furthermore, Regional efforts to 
obtain a regular quarterly review of revenue prospects from the Federal 
Government have been unsuccessful. Regional governments were often 
first informed of major changes in tax rates for Distributable Pool 
revenue sources by the newspapers rather than by official correspondence. 
The lack of information concerning changes in revenue prospects has been 

one of the most glaring failures of the constitutional revenue allocation 
system. Fortunately, monthly accounting statements detailing receipts 
of Federally collected Regional revenues are sent by the Federal Govern- 
ment to the Regions which allow extrapolation of future revenue trends 
from historical data. Such extrapolations can enable the Regional Gov- 
ernments to keep aware of likely effects on their finances. 



32 



(2) Treatment of New Revenue Sources 

(A) General Excise Duties . At the time of Independence, the 
only excise duties collected were on tobacco products and beer which 
were then the two most important products made by modern industry in 
Nigeria. In line with the treatment of import duties on these products, 
the tobacco excise duty was allocated to the regions by Section 132 of 
the Constitution according to the principle of derivation, and the beer 
excise duty was retained by the Federal Government. Later, excise 
duties were levied on mineral waters, soap, and matches as their Niger- 
ian production became significant. However, there was no constitutional 
provision for the allocation of their revenue proceeds. The constitu- 
tional power of the Federal Government over excise duties by Item 38 of 
the Exclusive Legislative List was therefore deemed to allow it to 
determine the tax rates and the allocation of such excise duties o 
Nevertheless, the Federal Government proved amenable to the argument of 
the Regional Governments that since local manufacture replaced imports, 
import duty revenue was thereby lost and should be replaced by excise 
duty revenue o Therefore, it was thought only fair to allocate general 
excise duty revenue in the same way as general import duty revenue, 
i.e., 70 per cent to the Federal Government and 30 per cent to the 
Distributable Pool for allocation to the Regions, 



33 



Later this argument became complicated when excise duties were 
levied on products based on Nigerian raw materials on which an export 
duty existed. Local manufacture of such products for domestic consump- 
tion meant that export as well as import duty revenue would be losto 
The proportions would very depending on the ratio of the cost of the 
exported raw material to the total cost of the manufactured producto 
Such an argument did not alter the Federal Government's position. The 

introduction of numerous excise duties in 196^ was followed by the ad 
hoc allocation of 30 per cent of them to the Distributable Poolo Cer- 
tainly this avoided an administrative morass which measures redressing 
the loss of export duties might have caused, 

Hovreverp this situation was not totally resolved by Federal Gov- 
ernment action, since the Regional Governments control the marketing of 
the major primary products through the Regional Marketing Boards » It 
would pay Regional Governments in terms of tax revenue to export their 
produce rather than sell it in the other Regions, especially since the 
local price is based on the foreign (London) price. The Regional Gov- 
ernment concerned would have to supply manufacturers in its own Region 
to maintain good industrial relations but would have little incentive to 
do so for manufacturers in other regions. Only a tax on goods sold to 
other regions equal to the export duty would equalize the realization 
from sales made abroad and to other regions. But such action may be 
deemed to be in violation of the national economic policy that there 



34 



should be no discrimination in trade between regions. Solution of this 
problem in a nondiscriminatory manner might be accomplished by one or a 
combination of the following; 

(i) amalgamation of the produce sales and export taxes at the 

Regional level; 
(ii) negotiation of domestic prices rather than having them be 

export-based; '*■' 

(iii) elimination of the duty on sales to other Regions; or 
(iv) Regional subsidization of selected local manufactures„ 

(B) Motor Spirit and Diesel Oil Excise Duties . The discovery of 
oil in Nigeria and the construction of the refinery at Port Harcourt 
again led to the substitution of local petroleum products for imported 
products, and thus to the substitution of excise revenue for import 
revenue. The Binns Fiscal Review Commission dealt with this change 
before the refinery came into operation in 19^5 by recommending that the 
new excise duties be allocated according to the region in which the prod- 
ucts are consumed, as had previously been done for motor spirit and 
diesel oil import duties. Therefore, Regional revenues were not affected 
by the shift to local petroleum. In fact, their revenues were increased 
when one considers the mining rents and royalties paid into the Distribu- 
table Pool. 

(C) Pools Betting Tax . Pools betting is a matter of Regional 
jurisdiction. However, the fact that many pools betting firms operate 



35 



nationally led to the judgment that administration and collection of the 
tax woid be best handled centrally, especially since it was originally 
intended to give a monopoly in pools betting to the partly government- 
owned Nigerian Pools Co, Ltd, The Eastern and Northern governments 
passed enabling legislation which allowed the Federal Government to 
legislate a pools betting tax for them as well as Lagos, The Western 
Region and the new Mid-West Region, in contrast, have established their 
own pools betting legislation and tax administration. Subsequently, 
however, the slowness of the Federal Government in allocating the 
revenue to the Regions participating in the centralized scheme and its 
failure to extend effective collection of the tax to new pools betting 
companies which it was licensing led the other regions to consider 
repeal of the enabling legislation and creation of their own pools 
betting tax administrations. 

At the beginning of I966/7, it appeared from the Official Esti- 
mates that the East was establishing its own pools betting tax admini- 
stration, while the North had not yet decided against having this 
revenue source Federally collected. The following statistics show the 
relative success of those Regions which have collected pools betting tax 
and license revenues themselves: 



36 



Regions vrith Own Collection 



West 

Mid-West 



Actual 196 V5 
(in t 000 's) 

152 

188 



Regions with Federal Collection 

East 
North 



52 

J48 
100 



Estimated I966/7 
(in t OOO's) 

145 
J40 

185 



51 
103 



The Regions which collected pools betting revenue themselves collected 
63 per cent of total Regional pools betting revenue in 1964/5 but have 
only 23 per cent of the Regional population and 35 per cent of 1964/5 
total Regional revenues. 

(3) Federal Government Grants to the Regions 



Although the Raisman Commission recommendations did establish an 
allocation of revenue among the Federal Government and the Regions, 
there were no constitutional provisions barring the making of additional 
grants or loans from the Federal Government to the Regions, The follow- 
ing narrative summarizes the grants that have been made to the Regions s 

(A) Natural Resources Grants . The development of the natural 
resources sector of the Nigerian economy was considered to be of primary 
importance in the I962/8 Development Programme, Responsibility for most 



37 



natural resources development rests with the ministries of Regional Gov- 
ernments. To induce a rapid expansion of Regional spending on natural 
resource projects, in the I962/8 Development Programme it was decided 
that the Federal Government would subsidize Regional Government expend- 
itures on natural resources to the extent of t25 m over the six-year 
plan period; provisionally tlQm was allocated toward capital expendit- 
ures and i>15m toward recurrent costs. For capital expenditures , the 
method of subsidization was to be 100 per cent reimbursement of actual 
expenditures up to the Region's share of the amount provided by the 
Federal Government for the purpose. The Federal Government never 
announced the basis of allocation of the grants among the Regions but 
the shares resembled the relative Regional populations according to the 
official census. Reimbursement of "investment" items on the recurrent 
budget such as research and agricultural education were not allowed. 
The system gave the Regions the incentive to spend as much as possible 
at no cost to the Regions until the subsidy could be fully claimed, but 
none thereafter » Federal Government budgeting of the grants has not 
served to provide even this incentive, however. The method of reimburse- 
ment for the first year of the development plan was not clarified until 
well into the second. No initial provision for the grants was made by 
the Federal Government in the financial year 196^/5, thereby concealing 
from the Regional Governments an accurate estimate of what grants they 
might expect that years Certainly, if the grants were not regarded as 



38 



being of "high priority," the excuse for the Federal Government could be 
given at the time the annual estimates were made that revenues were 
inadequate to make provision for the grants. If this argument is not 
justifiable, however, there would be unnecessary delays in implementa- 
tion of the natural resource development plan projects that would be 
financed by the grant. First, the Regional Government would be expected 
to budget a lesser amount for the grant- supported projects when it knew 
the Federal Government had made no initial budgetary provision. Second, 
even if grants are approved later in the financial year, a substantial 
lead time might be required before the projects induced by the grant 
were ready for commencement of construction. As far as inducing the 
desired regional expenditure, the principles of disbursement and timing 
of Federal grants should be firmly established and be consistent over 
time. 

The Federal Government made available iMm for natural resources 
grants for the first three -ears of the I962/8 Development Programmes, 
A further lA,2m has been provisioned for I965/6 and 1966/7. A final 
Jsl.Bm will be allocated to the last year of the plan to give the total 
of ilOm promised for the plan period. There is no indication that any 
of the additional iil5m there earmarked to meet recurrent costs will be 
in fact distributed, 

(B) Primary Education , The far lower percentage of the school 
age population attending primary school in the North as compared with 



39 



the other regions has frequently been cited as evidence of the baclcward- 
ness of the North and as a likely cause of future uneven economic growth 
of the North as compared with the other regions. This fact of life in 
contemporary Nigeria led to the provision of ii3.1m in the I962/8 Federal 
Development Plan for grants for primary education in Northern Nigeria, 
The Federal Government has made provision for only lrl,3m of this amount 
over the first five years of the Plan. These grants were not listed in 
any of the three priority categories in the plan for the education sec- 
tor, but separately below the priority listings with undefined status e 
Subsequent confusion has arisen over whether the priority of the grants 
was left undefined by the plan or the grants had lower priority than the 
other projects in the plan. Disbursement of the grants has been irreg- 
ular, often coming near the end of the financial year. Often the pro- 
vision for grants has not appeared in the Regular Estimates of the 
Federal Government, Consequently, the grant cannot be counted upon by 
the Regional Government in advance of actual payment. Each year the 
grant has been made, it has been in a block amount with no conditions as 
to expenditures. Presumably, the grants would not exceed the Northern 
Nigeria Government's capital expenditure on primary education. As with 
the Natural Resource grants, the uncertainty as to whether the grant 
would be paid in a given year and as to the amount and timing of pajnnent 
leads to the inducement of additional Regional development expenditure 
waiting until after actual payment of the grant has been made. Such is 
not the optimum operation of incentives for capital expenditure. 



iiO 



(C) Sixth Forms , The I962/8 Development Plan Progress Report 
listed an allocation of 1135,000 for the development of sixth, forms in 
the regions. It is unclear on what basis these grants are made to the 
regions, 

(D) Scholarship Grants , The relative baclcwardness of the North 
with respect to education has also led the Federal Government to make 
grants to the Northern Region to cover the costs of a supplementary num- 
ber of university scholarships to be awarded by the Northern Regional 
Scholarship Board, This program begain with the North taking over some 
Federal scholarships which had already been awarded with the Federal 
Government paying to the North the cash values of the scholarships at 
the Federal Government's rates of allowances. Again the dominating 
principles determining allocation have been the "need" for educated 
Northerners and the Northern Nigerian Government's inability to afford 
so many scholarships without Federal Government assistance ^ Grants of 
1.177,000 per annum have been paid each financial year since 1962/3o 

(E) Police and Prison Grants , In Northern Nigeria, Native 
Authority police forces exist in addition to the nationwide Nigerian 
Police o This presents an additional expense to Native Authorities in 
Northern Nigeria which is covered by the Federal Government expenditure 
through the Nigerian Police in the other regions » Consequently there 
would be reason for the North to desire equivalent Federal Government 
financial support of police forces in all regions » This could be 



^1 



accomplished by (l) Federal Government subsidization of Northern local 
government police forces,, (2) by Regional financial support in Southern 
Nigeria of police activities in their regions, or (3) by some mix of the 
first two alternatives. There could be objections to any of the above 
alternatives until the Native Authority policy in the North are placed 
under control of the Nigerian Police, rather than remaining under local 
government supervision. The first payment of an annual L300,000 grant 
from the Federal Government to the North was made in V^Gk/^, although it 
was not shown in the Northern Nigeria accounts until 13651 G» The I966/7 
Federal Government Estimates show a provision for a recurrent budget 
grant of 1300,000 for the Native Authority police forces in Northern 
Nigeria and a development plan project of capital grants to Native 
Authority Policy -with an estimated total cost of i.l„2m; but with no 
1966/7 provision. Furthermore, Northern Nigeria Government Estimates 
show that the Federal Government has paid a grant of £92,000 and a fur- 
ther ii36,000 has been promised as reimbursement for the construction of 
a Native Authority police wing at the Nigerian Police College at Kaduna,, ' 

(F) Miscellaneous Reimbursements , The Federal Government from 
time to time makes payments to the Regions for services performed by the 
Regional Governments at the request of the Federal Government or which 
relate to programs which fall under the jurisdictional responsibilities 
of the central government. Most of these reimbursements have been made 
to the Northern Regional Government. The amounts involved are frequently 



42 



quite small. Below is a list of such reimbursements, the region to 
which they have been paid, and an estimate of the amount to be paid over 
the 1960/1 to 1966/7 period; 



1, Reclamation of Mine lands 

2, Hydrological Survey 

3, Malaria Pre-eradication Campaign 

4, Exhibits for International Trade Fairs 

5, Health Measures at International Airports 

6, Native Authority Police used to police work 
on the Bornu Railx»ray Extension 

7, Payments in lieu of property rates on Federal 
Government buildings in Townships 

8, Agency Fees on Federal Government projects 
carried out by Regional Ministries of Works 

♦North only. 



Rep;ion 


Total 


North 


t 200,000 


North 


9,000 


North 


136,000 


All 


2,000* 


North 


13.000 


North 


21,000 


All 


225,000* 


ATI 


2,700,000 



It is possible that similar payments are made to the regions for other 
purposes, but are not reflected in the above- the- line accounts of the 
Governments . 



^3 



(k) Federal Government Loans to the Rep;ions 

The relationship between the Federal and Regional Governments in 
respect to borrowing may be discussed in three categories: (i) direct 
loans from one government to another, (ii) allocation of centrally- 
issued internal loan proceeds, and (iii) allocation of external loan 

proceeds, 

(A) Direct Intergovernmental Loans . 

(a) Federal to Regional Loans . Direct loans to the 
Regional Governments for specific or general purposes from Federal Gov- 
ernment expenditure items have been rare. In the cases of the extensive 
participation by the Northern Nigeria Development Corporation in the 
Cement Company of Northern Nigeria Ltd. and the K, Maroun (Pork Products), 
Ltd., loans of l!>500,000 in each case were made to the Northern Nigerian 
Government in the understanding that similar amounts would be lent by 
the Northern Nigeria Government to the Northern Nigeria Development Cor- 
poration, The rationale for such loans would appear to be based on the 
Federal Government's decision that such projects were necessary and that 
the Northern Nigeria Development Corporation's finances required Federal 
Government assistance if it were to invest xcithout causing corresponding 
undesirable reductions in the Northern Nigeria Government's capital 
expenditure program. Again, the general economic baclcwardness of the 
North would appear to be the only justification for this special 



liM 



treatment, since all the regions have industrial projects which required 
government financing which must be provided at the expense of other 
projects. 

(b) Regional to Federal Loans . In the 1950 's loans were made to 
the Federal Government by the Regional Marketing Boards, Of the loans 
which totalled 113. 7m, the West supplied £.7, 7m, the North 13. 9m and the 
East i2,lm. The ownership of the loan from the Western Region Marketing 
Board was later transferred to the Western Region Government which now 
receives the annual interest payments and principal repayments in its 
capital receipts. Interest and principal payments for the other regions 
continue to be made direct to the Regional Marketing Boards, As of 
March 31, 1965^ approximately t9e'4m of the loans remained outstandingo 

(c) Intergovernmental Float . A further aspect of the internal 
borrowing relationships among the Federal and Regional Governments is 
the "float" existing in the current accounts among the governments. 
This float arises from the fact that generally financially transactions 
between the governments are not settled by cash payment, but rather by 
debits or credits to an account each government has entitled the "Other 
Governments Clearance Fund," Between some governments, transactions may 
in total be offsetting and remove the need for actual cash transfers to 
be made. If transactions are persistently biased in favor of one gov- 
ernment, regular or special block payments are necessary to keep the 
account in balance. In the past few years, as is shown in Table ^, the 



k5 



TABLE k 

INCREASE IN END-OF-YEAR BALANCES OWED BY THE FEDERAL GOA^RNMENT 

TO THE REGIONS THROUGH THE "OTHER GOVERNMENTS CLEARANCE FUND"* 

(in t millions) 

Balance as of 
1961/2** 1962/3 1963/^ 1964/5 1965/6 2/28/66 



North 




-0.1 


0.5 


0.3 


4.0 


-0.8 


3.9 


East 




- 


1.9 


2.2 


-2.7 


1.9 


3.3 


West 




-1.1 


1.5 


2,0 


0.7 


-2.7 


0.4 


Mid-We£ 


;t 


- 


- 


0.2 


1.6 


- 


1.8 



TOTAL -1.2 3.9 4.7 3.6 -1.5 9.3 



*From Federal Government Accountant-General's Reports. The amounts 
given are not always consistent with the balances shown in the Regional 
Accountant-General ' s Reports . 

**Amounts in the account were negligible before I961/2. The balances in 
the accounts between Regions have remained small throughout the period. 



k6 



Federal Government has persistently owed money to the regions on current 
account, particularly to the North, East and Md-West. This debt had 
arisen through consistent, if not intentional, underestimation of neces- 
sary monthly settlement payments by the Federal Government which mainly 
consist of Regional revenues collected by the Federal Government and in 
the North also by late settlement of claims made by the Regional Govern- 
ment for reimbursement of payments it has made to the Federal Government 
Pay Offices. Needless to say, such ajpersistent "float" is equivalent 
to an interests-free loan which provides cash for the Federal Government 
at the expense of the liquidity of the Regional Government, Such a 
situation should not be permitted to exist over long periods of time in 
respect of substantial amounts, but should be handled through appropriate 
adjustment of revenue and loan allocations. Alternatively, interest 
could be made payable on "float" balances. 

(B) Internal Loans . Both the Federal and Regional Governments 
have the constitutional power to raise loans within Nigeria. However, 
central raising of internal loans has been judged desirable by all gov- 
ernments. Costly interest rate competition among governments issuing 
separate securities can thus be avoided; the receipt of loan proceeds 
need not be tied to the investment community's evaluation of the indiv- 
idual government receiving the loan; and the total amount of government 
credit outstanding can be controlled centrally, 

(a) Development Loans . Since Independence, the amount of long- 



^7 



term "development" loans to be issued has been decided at annual confer- 
ences of the Finance Ministers of the Federationo The total amount of 
securities to be issued depends on national economic objectives and 
expectation of public purchases of the securities, as well as the pres- 
sures exerted by the various governments to obtain loans. The division 
of the "development" loans among the governments is a matter of haggling 
between the representatives of the respective governments. In 19^5 d 
guidelines for the future allocation of the loans were agreed upon by 
the Finance Ministers of the Federations A normal allocation was agreed 
to be 50 per cent to the Federal Government, 20 per cent to the North, 
15 per cent to the Eastp 10 per cent to the West, and 5 per cent to the 
Mid-West, This formula corresponds closely to the actual division of 
expenditure between the Federal and Regional governments. The relative 
Regional shares correspond closely to their Distributable Pool shares « 
The formula was intended to be modified to meet special exigencies of 
individual governments' financial positions. In fact, in both 196^/5 
and 1965/6 the actual allocation differed from the standard set by the 
Finance Ministers, due to special financial difficulties of the West and 
Mid-West and the sizeable recurrent surpluses of the North, The actual 
distribution percentages for 196^/5 and I965/6 combined were : Federal 
Government 5^ per* cent, North 9 per cent, East Ik per cent. West 13 per 
cent, and Mid-West 9 per cent. Table 5 shows the allocation of Develop- 
ment Loans from I960/I to I965/6. 



ii8 



TABLE 5 
DEVELOPMENT LOAN ALLOCATIONS 



Federal Government 
Northern Nigeria 
Eastern Nigeria 
Western Nigeria 
Mid-Western Nigeria 

TOTALS 



1960/1 1961/2 1962/3 1963/it 196^/5 1965/6 Total 

1.1.7m i,7oOm ty.Om tl2.0m i.6.9in i.8c7m t^3»3m 

6.6 - 3.0 3.0 2.7 - 15,3 

1«7 - 2.0 2,0 2,1 2,1 9.9 

3.0 2.0 1.8 2.1 8,9 

- - - 1.0 1.5 lol 3o6 



tlO.Om L7.0m 1,15. Om £20. Om £15. Om Ll4.0m L8l„0m 



Source: Federal Government Accountant-General's Reports, 



^9 



(b) Treasury Bills . While the allocation of long-term Develop- 
ment Loans has been based on a process of formal consultations among the 
governments of the Federation, the allocation of short-term Treasury 
Bill proceeds has remained in practice a Federal Government prerogative. 
Table 6 shows the allocation of Treasury Bill proceeds. Virtually all 
of the Treasury Bill proceeds have been retained by the Federal Govern- 
ment (e.g., as of March 31t 1966, 91.9 per cent of the proceeds of the 
t37in in bills outstanding had been retained by the Federal Government) „ 
However, requests from Regional Governments for Treasury Bill proceeds 
to meet temporary problems were generally promptly fulfilled. Neverthe- 
less, these allocations to the Regions are to be retired when financial 
conditions permit, rather than being continuously turned over. With the 
development of a public asset demand for Treasury Bills (and assuming 
interest rates are not artificially pegged), a substantial amount of 
Treasury Bills can be and are continuously turned over. The amount of 
Treasury Bills outstanding has grown each year since their introduction. 
There would appear no reason why such issues cannot provide general 
finance for Regional Governments, as they in fact now do for the Federal 
Government. It is surprising that the reluctance of the Federal Govern- 
ment to make general allocations of Treasury Bill proceeds has not led 
to more Regional attempts to offer their own issues or to obtain alter- 
native short-term finance as the Northern Nigeria Government has been 
able to do through its Native Authorities Short-Term Surplus Funds 
Deposit Account, The centralized issue of government securities has not 
been interpreted as a restriction against public placement of the 



50 



TABLE 6 

NET ANNUAL ALLOCATIONS OF TREASURY BILL PROCEEDS 

(in L millions) 



Prior to 

1960/1 1960/1 1961/2 1962/3 1963/^- 196^(75 1965/6 Total 

Federal 

Government 2.0 9.0 0.2 h„5 5.8 6.8 5o7 3^»0 

North - - -^.0 -3.2 1.2 -0.8 -1.2 

East - - - - 0,5 -0„5 

West - - 3.0 2.0 0.5 -1.0 -2.5 2,0 

Mid-Wast - - - - 0.5 0.5 - 1.0 



TOTAL 2,0 9.0 7.2 3.3 8.5 5.0 2,0 37o0 



Sources Derived from Federal Accountant-General Reports, 



Note: Minus sign (-) indicates a net reduction of Treasury Bill borrowings. 



51 



securities of quasi-governmental bodies. Examples of such issues are 
the Broadcasting Company of Northern Nigeria debentures and an insurance 
company loan to the Northern Nigerian Housing Corporation, Both secur- 
ities were guaranteed by the Northern Nigeria Government. The main dis- 
advantage to this type of open-ended fund raising by the regions is that 
the interest rates paid are substantially higher than on the proceeds of 
the centralized "development" loans of comparable maturity, 

(C) External Loans . Item 5 of the Exclusive Legislative List of 
the Nigerian Constitution gives the Federal Government control over 
"Borrowings of money outside Nigeria for the purposes of the Federation 
or any Region, other than borrowing by the Government of a Region for a 
period not exceeding twelve months on the security of any funds or assets 
of that government held outside Nigeria," As a result, all Regional 
applications for external loan assistance, inquiries of prospective for- 
eign lenders, and actual lendings by aid agencies in support of Regional 
projects must pass through the Federal Government, Consequently, the 
Federal Government is in an administrative position of considerable 
influence as to the division of external loan proceeds among the Federal 
and Regional Governments, The question remains as to what extent and in 
accordance with what criteria should the Federal Government attempt to 
distribute loan proceeds. The matter is further complicated by the fact 
that much aid is tied to the specific projects -rfiich a particular lender 
is willing to finance. Often a lender i-rill be unwilling to change the 



52 



projects it is to finance because it is primarily interested in promot- 
ing a certain line of exports. In other cases, a lender may, for polit- 
ical reasons, be interested in courting the favor of one or more of the 
governments of the Federation, for example, Kuwait with respect to 
Northern Nigeria and Israel with respect to Eastern Nigeria. On the 
other hand, there are cases where general external loans are made to 
Nigeria with limited concern on the part of the lender as to their final 
destination except that they be applied to economically justifiable 
capital development projects. Since the sum of the projects submitted 
by the Federation Governments for such loans usually exceeds the loan 
funds so available, it would seem preferable to reach some agreement on 
principles for external loan allocations rather than have the Federal 
Government, due to its central position in the process, remain subject 
to inevitable charges of hoarding loan funds for its own use or of show- 
ing favoritism to certain regions. 

Table 7 shows the net sources and distribution of foreign loans 
to Nigeria, Table 8 gives the foreign grant and loan finance already 
provided and committed to Nigeria as compared to revised I962/68 Devel- 
opment Plan expenditures. In the original Plan document, it was esti- 
mated that 50 per cent of the finance for the Plan would come from 
external sources. The under supply of actual external aid received dur- 
ing the first years of the Plan may be attributed to (l) a lack of well 
formulated plan projects which could be put forth to aid agencies, (2) 



53 



Sources 

Funded (Interna- 
tional Flotation) 

United Kingdom 

United States 

IBRD 

Israel 

Italy 

Private 

Total 
Uses 



TABLE 7 
NET EXTERNAL LOAN ALLOCATIONS 
(in t millions) 
1961/2 1962/3 1963/^ 196^/5 1965/6 Total 



- 


- 


-5^7 


- 


- 


-5o7 


5.6 


1.6 


-0.2 


2.3 


5.3 


14.6 


- 


- 


- 


0.3 


0.3 


0.6 


1.0 


-0.2 


-0.^. 


-0.5 


-0.4 


-0.5 


1.1 


1.0 


-0.3 


-0.1 


-0.1 


1.6 


- 


- 


- 


lA 


1.8 


3c2 


oA 


0.9 


1.2 


2.4 


4.6 


9.5 



8.1 



3.3 -5A 



5.8 



-5.4 



5.8 



Total 8.1 3.3 

*Includes statutory corporations. 

Note ; Minus sign (-) indicates net repayments to lender 
Source: Derived from Federal Accountant-General Reports 



11.5 23.3 



Federal Government* 


7.3 


2.7 


-4.9 


4,1 


7A 


16.6 


North 


-0.2 


-0.1 


- 


0.1 


-0.2 


-0.4 


East 


1.0 


0.3 


-0.3 


0.5 


1.4 


2.9 


West 


- 


0.4 


-0,2 


0.8 


2.1 


3.1 


Mid-West 


- 


- 


- 


0.3 


0.8 


1.1 



11.5 23.3 



5^' 



TABLE 8 
EXTERNAL FINANCE FOR THE 1962-68 DEVELOPMENT PLAN 



External 
Finance 
Received 
1962/3 to 
196^/5 

Federal 

G overninen t* i26 , 5m 

North* 0.4 

East 2.3 

West 2.8 

Mid-West 0.0 



Additional Total 

External External Revised 

Finance Finance Plan 

Committed For Expenditure 

For Plan Plan Goals 



Total plan t32.0m 



tl00.3m 
19.7 
11.0 

11.5 
tl51.0m 



i,126.8m 
20.1 
13.3 
11.3 
11.5 



B521m 
102 

85 

113 

29 



Percentage of 
Plan Expenditure 
to be Financed 
by External 
Sources 



2H!^ 
ZOfo 
16% 

10^ 



tl83.0m t850m 



21^ 



♦Includes statutory corporations. 



55 



delays in processing aid applications by the external aid agencies, and 
(3) increases in local revenues over early estimates for the Plan, 

Control over contractor finance arrangements also remains a con- 
cern for the Federal Government. Sources of contractor finance offered 
to the Regional Governments and their statutory corporations usually 
require Federal Government guarantees of the repayments of principal and 
the interest on the credits made available. In order to maintain control 
over the nation's ability to service its debt, the Federal Government 
must consider limitations it should place on each Region's contracting 
of private external finance. In spite of impassioned official declara- 
tions against the evils of contractor finance, to date the Federal Gov- 
ernment seems to have avoided the allocation problem by approving 
virtually all contractor finance guarantees requested by its own Min- 
istries and by the Regional Governments, 

A final area of concern with respect to external borrowing arises 
from the holding of foreign assets by regional governments, their 
statutory corporations and local government bodies. These external 
reserves were almost entirely accumulated before Independence, Nigeria's 
international liquidity position would be more secure if its public for- 
eign assets were subject to central ownership and/or management. The 
alternative to continued regional holdings of foreign assets would be 
their exchange by the Central Bank for Nigerian Government securities. 
Several factors may have led to regional reluctance to adopt this course 
of action: 



56 



(i) Higher short-term rates in the United Kingdom than in Nigeria; 

(ii) The Crown Agents have acted as the overseas procurement 
agent for the Nigerian governments „ Frequently the governments are 
indebted to the Crown Agents on current account. Such indebtedness is 
presently covered by credit provided by the Crown Agents on the security 
of the Regional Government holdings of foreign securities which are kept 
with the Crown Agents „ The Federal Government or Central Banlc would have 
to assist in guaranteeing such indebtedness if foreign assets were all 
repatriated. 

(iii) Uncertainty as to the ability of the Regional Governments 
to liquidate reserve holdings when desired if the reserves are held in 
Nigerian securities which have a thin market as contrasted with the 
presently held foreign securities which can easily be sold on the broad 
London market; 

(iv) The desire of the Regional Governments that the Federal 
Government assure the Regions that repatriated funds invested in Niger- 
ian security issues whose proceeds will then be lent to the government 
which is repatriating the foreign assets. 

There has been considerable success in the policy of reducing the 
foreign asset holdings of the public sector outside of the Central Bank 
since Independence. Table 9 below shows the reduction in holdings of 
foreign assets by the governments of the Federation and their statutory 
corporations. If the problems mentioned above are solved, independent 
holdings of external reserves might become minimal. 



51 





TABLE 9 










EXTERNAL RESERVES 










(as of 


March 31st) 










1961 


1962 


1963, 


196'^' 


1965 


Regional Governments 
Federal Government 


31 


t20in 
30 


t 6m 
27 


t ?m 
10 


I, 9m 


Statutory Corporations 


8 


-1 





h 


2 


TOTALS 


l,60in 


t^9m 


t33m 


L2]jn 


Llljn 



58 



However, it should be remembered that the reduction in the 
external reserves shown above reflects not only shifting from foreign to 
Nigerian asset holdings, but also the use of reserves to finance 
expenditure, 

(5) The 196^ Fiscal Review Commission 

Section l6^ of the Constitution of the Federation of Nigeria pro- 
vides that the Governments of the Federation, acting after consultation 
with the Governments of the Regions shall from time to time appoint a 
Commission to review and make recommendations with respect to the provi- 
sions of the sections of the Constitution dealing with the composition 
and regional distribution of the Distributable Pool, Accordingly, in 
196^4 Mr. K. J. Binns, a. high Australian tax official, was appointed sole 
commissioner to make such a review, the first since the Raisman 
Commission. 

The Commission's scope for recommendations were quite limited. 
Section l6^ of the Constitution calls for recommendations as to the per- 
centages of general import duties and mining rents and royalties to be 
allocated to the Distributable Pool and to the division of the Distribu- 
table Pool among the regions. In making recommendations, the Commission 
was to consider the experience of all five governments in working the 
present system, the creation of the Mid-West region, all the actual and 



59 



potential sources of revenue and other receipts available to all five 
governments, and the legitimate requirements and responsibilities of 
each of the five governments. Upon the commencement of the Conmission's 
sittings, the Federal Government added to the terms of reference that 
the Commission should consider "the financial implications of the non- 
availability of promised foreign aid for university education and other 
unfulfilled pledges," The remainder of the terms of reference had been 
agreed to by the participating Regional Governments. Consequently « the 
Regional Governments were not pleased with the Federal Government's 
insertion of this item in the terms of reference without appropriate 
time for joint consultation. 

The Commission discussed the position of each of the Federation 
Governments with respect to allocation changes with leading politicians 
and civil servants and obtained position papers from each government. 
The Commission also requested certain specific statistics from each 
government. The Commission experienced considerable difficulty in plac- 
ing each government's financial statistics in a comparable format. The 
differential importance of local government bodies in the Regions added 
to the difficulties of comparison. In its report, the Commission urged 
that before another Fiscal Review took place, that the governments 
arrange for a common classification of revenues and expenditures (at 
national, regional and local government levels) and for periodic report- 
ing of this data to a central agency. 



60 



The terms of reference of the Commission were interpreted differ- 
ently by the participating governments « The Federal Government main- 
tained that the Commission was strictly limited to changing the propor- 
tions of the Distributable Pool given to each region and the shares of 
mining and general import revenue allocated to the Distributable Poolo 
The views of the regions ranged among; (i) that the Commission would not 
be limited to only those adjustments if the considerations required in 
the terms of reference led such adjustments to be insufficient to 
achieve a desirable change in the revenue allocation among the govern- 
ments in accordance with the considerations listed in the terms of ref- 
erence, (ii) that the possible inclusion or exclusion of all revenue 
items in the Distributable Pool was subject to review by the Commission, 
and (iii) that a thorough review of the revenue allocation and 
responsibility systems was necessary. 

Views of the regions as to the principles upon which the revenue 
allocation should be made varied directly with the financial interests 
of the governments involved. The experience of recent years led govern- 
ments to change positions drastically from presentations before previous 
Fiscal Review Commissions „ Attitudes toward regional autonomy in rev- 
enue allocation by the regions often differed substantially from the 
viewpoints of the political parties in control of the regional govern- 
ments with respect to the question of regional autonomy in generalo 
That this dichotomy could occur was the result of (i) the drawing up and 



61 



presentation of regional viewpoints largely being done by civil servants 
with little direction from the politicians, and (ii) the judgment of 
some of the leading politicians to regard the fiscal review as a tech- 
nical rather than a political matter. The latter course of action was 
necessary to keep the fiscal review from becoming a crisis issue, as it 
has been in numerous other federations. Surely the fragile unity of the 
Nigerian Federation during the time of the review being considered in 
196^ and 1965 might not have been able to withstand a further crisis 
additional to the labor, census, and election crises it was then 
attempting to weather. 

The North, which is able to provide far less in terms of 
expenditure per capita than the other regions, pleaded its case for 
additional revenue allocations on the grounds of need and the establish- 
ment of minimum national standards in healthy education, etc. Neverthe- 
less, the North did not advocate the total elimination of derivation as 
a principle in revenue allocation. It did, however, attempt to stress 
the difference betijeen derivation where it applied to tax incidence, 
e.g., the personal income tax, and where it was not related to incidence 
but to property rights, e.g., mining revenue. The West was concerned 
with its relative economic stagnation since the previous Fiscal Review 
Commission which cut its revenue allocation sharply, due to its relative 
prosperity. The West maintained that it should be allowed to expand its 
public expenditure at a rate comparable to the other regions. The 



62 



unfavorable recommendations with respect to the West of the Raisman Fis- 
cal Commission^ it was argued „ had been instrumental in the relative 
stagnation of government economic development programs in the VFest,, The 
Mid-West pressed its need for funds to finance its new regional adminis- 
tration and new capital city. Moreover ^ it was argued that these needs 
could be met either by a special grant from the Federal Government or by 
greater dependence on the principle of derivation (which would return a 
a greater part of the burgeoning oil revenue to the Mid-West). The East 
was most extreme in its call for almost complete reversion to the prin- 
ciple of derivation in revenue allocationc Again, rapidly expanding 
revenues through both oil royalties and leases and the profits tax 
prompted this viewpoint and its advocacy of the allocation of companies' 
income tax to the region of origin.o A jibe was placed at the Federal 
census figures and the North by the proposal that any resulting short 
fall in Federal Government revenue be met by a uniform head tax levied 
against the Regions, The Federal Government itself stressed its 
increasing responsibilities vis-a-vis the regional government with 
respect to external affairs, defense, and higher education in presenting 
its case for a reduction in the regional share of general import duties 
and mining revenues. It also stressed the need to provide the central 
government with sufficient financial resources to assure its stabilityo 
The Federal Government took no position on the allocation of revenues 
among the regions. The East and the West both claimed they had 



63 



demonstrated greater efforts in tax collection than the North and should 
not be penalized in the revenue allocation for this effort. The accur- 
acy of this issue was clouded by the fact that a vast majority of per- 
sonal tax revenue in the North is collected and remains at the local 
government level rather than being shown in the regional accounts as in 
the other regions. Similarly, the Northern Nigeria Government's need 
for funds on an expenditure per capita basis would not be as great as 
the other regions since more services are performed at the local govern- 
ment level in the North than in the other regions. 

The recommendations made by the Fiscal Review Commissioner dis- 
played his political acumen. The goal of national unity was placed 
foremost. The net effect of the recommendations to be described in 
greater detail below were to give certain Regions financial gains but 
not at the expense of the other Regions but at that of the Federal Gov- 
ernment, As a result, the usual Regional bias of Nigerian political 
issues could not exercise its accustomed weight. Regions were not 
pitted one against another. The recommendations gave substantial gains 
to the North, West, and Mid-West -with the Federal Government taking the 
offsetting loss and the net position of the East remaining virtually 
unaffected. To amend the Nigerian Constitution, the Federal Parliament 
and three of the four Regional Legislatures need to approve the proposed 
amendments. The Commission's recommendations thus insured that if the 
Federal Government agreed to the reallocation, the East could not block 



6k 



the constitutional amendments needed to bring the reallocation into 
effect, since the other three regions would almost certainly support the 
proposed reallocation. 

The Fiscal Review Commission was of the opinion that changing the 
Regional shares of the Distributable Pool and the amounts of general 
import and mining revenue included in Distributable Pool was not the 
most satisfactory means of increasing regional financial resources „ The 
difficulties described previously concerning the reporting of information 
concerning projections of Federal revenue to be distributed to the 
regions, the high variation in such revenue sources, and the problems in 
the payment procedures cause the regions to face great uncertainty in 
their budgeting and as a result cannot make the most effective use of 
all the funds they do receive „ Consequently, the Commissioner preferred 
that the Regions be paid block grants to increase their revenues and 
reduce the uncertainty involved in their budgeting processes » He noted, 
however, that a similar change could also be worlced out by altering the 
Distributable Pool formulae. 

The Commissioner's recommendation to distribute the excise duty 
on motor spirit and diesel oil according to derivation stirred little 
controversy since it was the same as the principle in use for the allo- 
cation of motor spirit and diesel oil import duties which the new excise 
duties replaced e Below are given summaries of each of the three alter- 
native sets of the Fiscal Review Commission's recommendations: 



65 



Alternative I 

(1) General excise duties to be retained wholly by the Federal 

Government; 

(2) 30 per cent of general import and mining revenue to be paid 
to the Distributable Pool; 

(3) Distributable Pool shares of ^0 per cent North, 31 per cent 
East, 21 per cent West and 8 per cent Mid-West; and 

' {k) Block grants paid by the Federal Government to the Regions 
as follows; 

North t2.0m 

East to. 8m 

West to, 6m ' 

Mid-West tO,35m 
Alternative II 

(1) 30 per cent of general import duties, mining revenue and 
general excise duties to be paid to the Distributable Pool; 

(2) Distributable Pool shares of ^0 per cent North, 31 per cent 
East, 21 per cent West, and 8 per cent Mid-West; and 

(3) Block grants to be paid by the Federal Government as follows; 

North tl«7m 

East to 06m 

West to. 4m 

Mid-West t0.3m 



66 



Alternative III 

(1) 35 per cent of general import duties and mining revenue to 
be paid to the Distributable Pool; 

(2) Distributable Pool shares of kZ per cent North, 30 per cent 
East, 20 per cent West, and 8 per cent Mid-West; and 

(3) No specification about the disposition of general excise 
duties ; in the calculations below, we assume that all of these duties 
revert to the Federal Governmento 

The Commission made its recommendations in July^ 196^, with the 
expectation that they would be in force for the financial years I965/6 
to 1968/9. However, for political and administrative reasons, the 
report of the Commission was not considered until mid-1965 o To deter- 
mine the expected net effect of the various recommendations, it is 
necessary to make estimates of the relevant revenue sources as has been 
done below; 

Revenue Source 1963/^ 1 964/5 Estimate I965/6 Estimate I966/7 

General Import ii'^7»6m t65o3in 
General Excise 0,3 2.3 
Mining 6„5 10,3 

The various alternatives would thus have the following financial effects 
on the budgets of the Federation Governments using the I966/7 estimates 
of revenues; 



1^65, 


,0m 


i72< 


,0m 


4, 


.6 


8, 


.5 


12, 


>7 


17 < 


.0 



6? 



Alternative I 


Federal 
Government 


North 


East 


West 


Mid-West 


(1) 


+ ^.55m 


-12 o 55m 


-to „ 83m 


-tOo^Sm 


-to „ 16m 


(2) 


- 


- 


- 


- 


- 


(3) 


- 


-0,56 


-0o^4 


+Oo55 


+0A5 


W 


-3.75 


+2,00 


+O08O 


+0,60 


+0.35 



TOTAL 



i,1.20m 



+i,0„37m -i,0„^7m +i.0„67m +i0„6^m 



Alternative 


II 


Federal 














Government 


North 


East 


West 


Mid-West 


(1) 




- 


- 


- 


- 


- 


(2) 




- 


-0.56 


-0„^4 


+0,55 


+0,45 


(3) 




-3.00 


+1,70 


+0.60 


+0„40 


+0„30 



TOTAL 



t3,00m +tlol^m +L0,l6m +L0„95m +L0„75m 



Alternative IH Federal 

Government 



(1) 

(2) 

(3) 

TOTAL 



AA5 



+2,55 



-i,lo90m 



North 



East 



West 



Mid-West 



+lc87 


+ 1,3^4 


+0,89 


+0,36 


-0<,03 


-0„82 


+0,33 


+0,52 


-1,07 


-0,83 


~0A8 


-0,16 



+L0,77m -L0,31m +L0„74m +L0,72m 



After the Fiscal Review Commission Report was submitted to the 
governments of the Federation, the National Economic Council met and 



68 



approved Alternative III of the recommendations. The necessary Consti- 
tutional amendments were approved by all five Federation Governments, 
the last approval being that of the Federal Government which was given 
just before the January, I966 coup. The amendments were implemented 
under the Ironsi regime c Difficulties of interpretation did arise „ 
however, over the disposition of general excise revenue whose ad hoc 
allocation to the Distributable Pool was ceased and over the commence- 
ment date of the new allocation system which in the end was delayed 
until April 1, 1966, rather than having been made retroactive to 
April 1, 1965 e 

(6) Expenditure 

Interregional financial relationships are determined, not only by 
the allocation of finance sources, but also by the division of responsi- 
bility for and pattern of expenditure So In addition, the allocation of 
finance sources will not always depend on abstract criteria such as need 
and derivation, but also on the absence or presence of "worthwhile" 
projects on the drawing boards of each government unable to proceed for 
lack of funds. In this context, expenditures may be discussed under 
four headings: (i) Regional vSo Federal jurisdication, (ii) Regional 
patterns of expenditure, (iii) distribution of Federal recurrent 
expenditure and (iv) distribution of Federal capital expenditure. 



69 



(A) Jurisdiction , The Exclusive and Concurrent Legislative Lists 
of the Nigerian Constitution define what areas are subject to Federal 
action alone, concurrent Federal and Regional activity, or are residual 
to the Regions. Consequently, jurisdictional disputes over expenditure 
responsibilities would arise from (a) attempts to amend the Legislative 
Lists, (b) problems in interpreting the scope of items included in the 
Legislative Lists, and (c) determining a desirable balance of Federal 
and Regional expenditure and responsibility in areas in which both are 
active. 

Three cases which may be used as examples of the Regions attempt- 
ing to get the Federal Government to accept greater expenditure respon- 
sibilities for items appearing on the Concurrent Legislative Lists are: 
Universities, Agricultural Research, and Native Authority Prisons in 
Northern Nigeria, 

A National Universities Commission was established to make 
recommendations concerning the administration and financing of the five 
Nigerian universities. Federal Government action subsequent to the sub- 
mission of the report led to a system of annual block grants from the 
Nigerian Governments to finance the universities. In the case of the 
"national" universities of Ibadan and Lagos, 100 per cent of the block 
grant was to be furnished by the Federal Government. The block grants 
to the "regional" universities at Zaria, Nsukka, and Ife were to be com- 
prised normally of a 30 per cent subvention from the Federal Government 



70 



and a 70 per cent subvention from the government of the region where the 
university was located. Because of the remaining large numbers of non- 
Northern Nigerian students at Ahmadu Bello University at Zaria, the Fed- 
eral Government agreed to pay on a temporary basis ^0 per cent of the 
block grant to that school. The Regional Governments were unhappy in 
that the Federal Government subventions were less than those recommended 
by the National Universities Commissions, The Federal Government main- 
tained that its responsibilities for total support of the universities 
at Ibadon and Lagos made it financially impossible to make grants to the 
regional universities of the size proposed by the National Universities 
Commission. 

The University at Zaria has associated with it Institutes of 
Agricultural Research and Administration. The University at Ife also 
has an Institute of Administration. In Eastern Nigeria, the Institute 
of Administration is run as a part of Regional Government. Research on 
the main export crops of the East and West was done by the Nigerian 
truncations of the former West Africa Cocoa and Palm Products Research 
Institute, which were primarily Federal responsibilities but which have 
also received varying subventions from all the Regional Governments. 
Objections by the Federal Government to inclusion of the institutes 
located at the regional universities in the subventions proposed by the 
National Universities Commission centered around (l) the large number of 
nondegree courses given by the institutes, (2) the primary objective of 



71 



research rather than training characteristic of the institutes of agri- 
cultural research, and (3) the lack of uniformity in including the 
institutes in the three regional universities. The primary outstanding 
concern on the issue remains the standardization of Federal Government 
financial support for research on export products, since the Federal 
Government provides support for cocoa and palm products research but 
does not do so for the export crops of the Northc "Scientific Research" 
is a subject on the Concurrent Legislative List of the Constitutiono 

In our discussion of Federal Government grants to the Regions, 
the controversy over Federal financial support of Native Authority 
Prisons expenditure in the North was mentioned^ The two sides of the 
argument demand, on the one hand, uniform Federal control over prisons 
in all Regions and, on the other hand, uniform Federal financial support 
of prisons in all Regions. It would seem that the impasse cannot be 
solved satisfactorily without standardized Federal action on both counts „ 

A final area where Federal and Regional expenditure responsibil- 
ities become clouded is in meeting natural or man-made disasters „ Fed- 
eral assistance has been made available in the case of disastrous floods 
in the Western Region. Large-scale rioting in I966 x^rith subsequent 
refugee movements led to Federal assistance to the Regions to alleviate 
the financial burden imposed on the Regional Governments, especially 
that of the East, It would seem, that Federal Government financial inter- 
vention in such disasters must rest with its ad hoc judgment that the 
administrative or financial scope of the disaster is beyond the ability 
of the Regional Government(s) to handle. 



72 



(B) Regional Expenditure . By the nature of the Constitutional 
division of responsibilities between the Federal and Regional Govern- 
ments, it can be expected that Regional Governments together with their 
local government bodies will perform roughly the same services and 
activities in all regions. An aspect of public expenditure relating to 
this and the following two subsections is the economic effect of expend- 
iture relating to this and the following two subsections is the economic 
effect of expenditure due to its geographical distribution. It may be 
safe to assume each Regional Government spends a similar proportion of 
its expenditure within its own territorial area. Several factors do 
indicate, however, that a larger percentage of the expenditure of North- 
ern Nigeria may be of direct benefit to other regions for the following 
reasons; 

(i) the North must import a larger share of the manufactured 
products it uses from other regions, due to the relative lack of 
industry in the North; 

(ii) the North must use more non-Northern workers in its govern- 
ment and on its capital development projects than the other regions, due 
to its lack of skilled labor; 

(iii) the North must transport its sea imports across other 
regions while other regions need not do so. 

An element of the expenditure allocation among the regions results 
from the setting of Development Plan expenditure targets or totals for 



73 



each government. The I962/8 Development Programme for Nigeria was 
approved at the highest political level by the National Economic Coun- 
cil,, Each government had a capital expenditure plan approved for it of 
a given total money amount* Each plan was comprised of projects with 
estimated costs » Where project detail was not yet available, provi- 
sional sectoral allocations were made^ There is no clear explanation as 
to how the original allocations of capital expenditure shown in column 
one of Table 10 were raadoo In addition, the planning exercises gave no 
specification as to how funds would be channeled to the various govern- 
ments to fulfill the Development Plan capital expenditure allocations, 
although it did estimate the sources of funds through the established 
channels. Neither were there restrictions placed on the growth of 
recurrent expenditure for each government„ Nor has there been any cen- 
tral review of switches in or augmentations to Development Plan expend- 
iture by any of the individual governments to the Piano Column three of 
Table 10 shows the revised plan expenditure totals as of raid-1965o 
Noteworthy is the greater than 50 per cent increase in the size of the 
combined West/Mid-West plan since the conception of the Plan, 

Table 10 below shows the original plan expenditure approved by 
the National Economic Council for each of the Federation governments, 
the actual expenditure of the first three years of the plan period, and 
revised estimates of total plan expenditure. 



TABLE 10 
1962/8 DEVELOPMENT PROGRAMME EXPENDITURE 



7^' 



Government 


Original 

Plan 

Expenditure 


Actual 
Expenditure 
1962/3 - 
196i(/5 


Revised 

Plan 

Expenditure 


(2) f (3) 

Completion 
of 

Revised 
Plan 


(2) 1 (1) 

Completion 
of 

Original 
Plan 




(1) 


(2) 


(3) 


(4) 


(5) 


Federal 


i237m 


t82m 


L324m 


265? 


35^ 


Stat, Corps. 


165 


68 


197 


J5i 


U-li 


North* 


89 


26 


102 


z(4> 


29^ 


East 


68 


31 


85 


37i 


k6i 


West 


90 


26 


113 • 


23^ 


2% 


Mid-West 


_ 


2 


29 


7i 


_ 



♦Includes statutory corporations, 



15 



The significance of the Development Plan in resource allocation 
among the Federation governments is three-fold; (l) the Plan's flexibil- 
ity — there is no assurance that resources will be made available to 
allow any government to meet its plan goals fully or proportionately 
together with the other governments, (2) the Plan's lack of legal force 
— there are no legal restrictions which prevent unilateral alterations 
of its plan expenditure goals by any government, and (3) on the positive 
side — the informal influence of the Plan whereby the gap between Plan 
goals and estimated sources of finance for each government may be very 
important in leading new external aid sources to direct the flow of 
their aid or in influencing the allocation of those local funds sources 
that are not fixed by the Constitution^ An unusually large uncovered 
financing gap for one government may move external aid sources to fund 
the gap more readily than for governments whose gap is smaller c In this 
manner. Development Plan expenditure goals may be of indirect influence 
in determining the allocation of finance sources „ 

(C) Federa l Recurrent Exp enditure. It is unlikely that the geo- 
graphical distribution of Federal Government recurrent expenditure can 
be altered rapidly to shift its impact on the economies of the four 
regions c Mich of the expenditure relates to staff and facilities which 
are fixed in location or which must for one reason or another be located 
in the area around the national capital, Lagos, or at each of the regional 
centers. Other than the directing to desired regions of specific grants^ 



1(^ 
/ 

the scope for altering the geographical pattern of Federal Government 
recurrent expenditures is rather liinited, 

(D) Federal Capital Expenditure „ Through the distribution of its 
capital expenditure p the Federal Government can greatly stimulate the 
economies of favored regions. Unfortunately, Federal capital expend- 
iture is not listed in a manner conducive to a reliable Regional break- 
downo Almost ^5 pei* cent (by value) of the Plan projects cannot be 
identified with any Region or Regions from the published Plan documents 
alone. Frequently Plan projects include activities of a similar nature 
throughout the nation or refer to a single nationwide objective included 
as a project. In many other cases , projects have activity in two 
regions which are identified; but any breakdown of the project between 
those regions is conjecture „ Furthermore „ although projects are physic- 
ally located in one region, their benefits, origin of components, and 
origin of labor may extend to other regions in large or small parto 

Consequently, this study has not been able to delve deeply enough 
into Federal Government capital expenditure data to make any informed 

opinion as to its regional irapacto Hoxrever, a cursory examination of 
the Plan indicates that (l) expenditure in the Federal Capital Territory 
of Lagos may be as great as or greater than in any one of the Southern 
regions; (2) the Niger Dam project in the North gives that region by far 
the greatest amount of expenditure; (3) if it were not for the Niger Dam 
project, which xd-ll benefit the whole country, the distribution of Plan 



11 



expenditure might not differ far from the population distribution; and 
(^) if any region has suffered from a dearth of Federal development 
projects, it is the West. 

(7) As set Holdings 

The Regional and Federal Governments may hold a varying portfolio 
of assets, ranging among currency p current balances due from other gov- 
ernments or statutory corporations, bank deposits. Treasury Bills, 
Nigerian Development Stocks, balances with the Crown Agents, foreign 
securities, and outstanding loans or investments made locally » These 
assets embrace a wide range of yield, risk, and liquidity character- 
isticso The asset reserve position of a government must be considered 
in any exercise allocating finance resources. Accumulation of large 
balances may indicate little concern with increasing capital development 
expenditures, the incapacity to spend or certain precautionary motives o 
Accumulation of surpluses invested in overseas securities implies that a 
revenue allocation procedure is a one-shot process in that no other 
Nigerian government gets an opportunity to use funds which are surpluses 
to the recipients In contrast, placement of surplus funds in Nigerian 
government securities may enable a second government who needs the funds 
to use them by increasing the demand for such securities o Such invest- 
ment of surplus funds enables greater issues of Nigerian securities 



78 



whose proceeds can be directed to more needy governments » This proced- 
ure may not be as desirable in the budgeting procedure as an original 
allocation which is in line with spending capacities or desires, since 
the secondary recipient cannot be very sure in his original budgeting 
that such proceeds will become available. 

Table 11 gives the asset-holding position of the Nigerian govern- 
ments as of March 31, 1965 » It should be noted that the cash require- 
ments of the various governments may differ due to the volume of trans- 
actions, geographical dispersion of Treasuries, etc. The investment 
demands of the Regional and Federal Governments will also differ in that 
the latter has direct access to the printing presses of the Central Bank 
in a financial emergency, while the Regions are one step removed and 
cannot be sure of what relief they might receive while under duress. 
Consequently, the relatively large security investments of the Regions 
as compared with the Federal Government should not be thought strange » 

TABLE 11 
GOVERNMENT ASSET HOLDINGS AS OF MARCH 31, 1965 







Federal 














Government 


North 


East 


West 


Mid-VJest 


Cash* 




t l^o^m 


i5.2m 


1.1.9m 


12, ^m 


ilo7ra 


Investments 




1.0 


^■.6 


if. 6 
e,5 


2.0 


.- 


TOTAL 


15.^1' 


9.8 


1.7 


Other Loans 


and 












Investments** 


91.6 


*** 


6,7 


27.1 


0,1 



*Includes Treasury Bills, 

**Face value; real worth not known. 

***Not available but relatively small. 



79 



Consideration of a government's asset position might better be made on a 
net basis. Exactly comparable public debt statistics were not found, 
but the following give an indication of the relative public debts of the 
Nigerian Governments: 





Public 


Sinlcing 


Net 




Debt 


Funds 


Debt 


Federal 








Government 


£97. 6m 


n.a„ 


n.a. 


North 


26,6 


2.2 


24.4 


East 


12 o^- 


1.1 


11.3 


West 


10.3 


0.7 


9.6 


Mid-West 


3.5 


n.a. 


n.a. 



as of March 31, 1964 
net of regional debt 

as of March 31, 1965 



III, The Impact of the Nigerian Financial Arrangements on Government 
Finances 



Tables 12-16 show the funds sources and uses for the Federal Gov- 
ernment of Nigeria and the four Regional Governments in the years since 
Independence o The statistics used have been derived from the Accountant- 
General's reports 5 Estimates and Gazettes of the respective governments. 
However, the classification is the author's own and others may disagree 
with this interpretation of that data. 



Sources 



80 

TABLE 12 

FINANCES OF THE FEDERAL GOVERNMENT OF NIGERIA 

(in t millions) 

-- Estimate 

1960/1 1961/2 1962/3 1963/^ 19_6^/5 1965/6 1966/7 



Federally collected 

revenue^ 112.^ 113.2 11^,1 122.0 IM6A 156.9 180.7 

Internal loans^ 10„0 7.0 15.0 20.0 17.1 1^.1 l5ol 

External grants 1,0 0.1 0,5 0.3 -0.2 0,5 lo3 

External loans 10.8 9.2 G,k 0.9 3.8 20.1 _J^ 

GRaSS TOTAL SOURCES 13^.2 129.5 136.0 1^3.2 I67.I 191.6 232.1 
Deduct Payments to Regions 

Grants^ - 0.1 0.2 4.8 0.9^ -^ 2.6 

Loans^ 9.6 2.5 9.3 8.2 11.8^ 14.0^ I5.8 

Derivation allocations'^ 28.6 32.0 31.4 33.1 39.5 . ^■6.9 

Distributable Pool - / 

allocations 12.8 15.4 15.8 15.9 24.3 31o2 

TOTAL DEDUCTIONS 51,0 5O.O 56.7 62.0 76.5 79.6 96.5 

NET TOTAL SOURCES 83.2 79.5 79.3 81.2 90.6 112.0 135.6 

Uses 
l.Recurrent expenditure^'^ 45.7 52.0 58.4 69.8 71.6 78.6 95cO 
2. Capital expenditure^ 38.5 29.4 31.7 32.0 34.5 42.1 78.9 

3, Re serve additions or 

Deductions (-) -1.0 -1.9 -10.8 -20.6 -15.5 -8.7 -38.3 

TOTAL USES 83.2 79.5 79.3 81.2 90.6 112,0 135.6 

a. Excludes interest and repayments on loans held by regional governments. 

b. Excludes short-term loans, e.g., Treasury Bills. 

c. Includes both statutory and nonstatutory allocations, 

d. Includes ad hoc allocations of general excise duties by the Distributable 
Pool Formulae. 

e. Does not include grants and loans to regions. 

f . Includes only external grants or loans due to lack of data concerning 
disbursements from individual capital expenditure subheads, 

g. Does not include recurrent budget grants to regions, 

h. Does not include transfers to the Capital Development Fund, 



81 



TABLE 13 

FINANCES OF THE GOVERNMENT OF NORTHERN NIGERIA 

(in t millions) 



Sources s 

1, Regional revenues 

2, Marketing Board 

3. Derivation allocations 

-^o Distributable Pool 
Allocations 

5. Fed c Govt » Grants and 
Reimbursements 

6„Fed, Govt, Loans 

7. External Grants and 
Reimbursements 

SoExternal Loans 
TOTAL SOURCES 



1960/1 


1961/2 


1962/3 


1963/^1' 


196^/5 1965/6 


Estimate 
1966/7 


3.^- 


4o7 


6A 


6.9 


8.^' 7.7 


9cl 


Ie2 


0.8 


0.5 


0.6 


0.3 0o7 


5A 


8o4 


10.1 


9.^ 


11.2 


1^.3 \ 

^23o9 


16„5 


5.3 


5.8 


7A 


6.7 


10,3 


13.1 


0.3 


0.3 


OA 


2.1 


1.7 2.0 


lc7 


6.6 


- 


3.0 


3.0 


^.0 


- 


0.^^ 


0o2 


OA 


OA- 


OA' OA 


I06 


2.0 


- 


- 


0.1 


OA' 0,1 


5o5 


27o6 


21.9 


27.5 


3I0O 


39.8 3^.8 


52c9 



Uses : 

1, Recurrent expenditure 

2 .Capital expenditure 

3. Reserve additions or 
deductions (-) 

TOTAL USES 



b.c 



17.5 


20.0 


6.2 


8.2 


?.? 


-6.3 


27.6 


21.9 



21.7 23.3 25.4 28.2 32„3 

6.6 6,8 8,7 9.2 32o3 

-0.8 __0_,_9_ 3.o7 -2,5 _0_A 

27.5 31.0 39.0 3^. 8 52.9 



a. Does not include Treasury Bill onlendings, 

b. For 1960/1 to 1963/^, Ministry of Works Staff Charges which appeared in the 
Capital Budget are included in Recurrent Expenditure in conformity with the 
practice of the other Governments. 



c. Does not include transfers to the Capital Development Fund. 



82 



Sources 



TABLE 1^ 

FINANCES OF THE GOVERNMENT OF EASTERN NIGERIA 

(in t millions) 

- . ^ .. _ - Estimate 

1960/1 1961/2 1962/3 1963/^ 196^/5 1965/6 1966/7 



1. Regional revenues 


6.2 


7A 


7.7 


8.2 


8.8 




10.3 


8.0 


2, Marketing Board 


0.1 


4.. 2 


22 


3e2 


2.2 




2.2 


2.8 


3. Derivation allocations 

^.Distributable Pool 
allocations 


6.5 
4.1 


9.6 

4o5 


8.9 
5.1 


8.6 
5.1 


10.1 
7.9 


V 


20.2 


13ol 
9.3 


5«Fed.Govto Grants and 
Reimbursements 


0.2 


0.2 


_ 


1.3 


0.1 




0.8 


0.6 


6. Fed. Govt, Loans 


- 


1.7 


2.0 


- 


2.2 




2.1 


2.1 


7. External Grants and 
Reimbursements 


0.7 


0.2 


0.1 


0.2 


<_ 




0.1 


0.9 


8 .External Loans 


1.0 
18.8 


1.1 
28.9 


0.5 
26.5 


— 


1,0 
32.3 




0.? 
36.2 


3o5 


TOTAL SOURCES 


26.6 


40.3 



Uses 



1, Recurrent expenditure^ 


15.3 


16.8 


17.7 


19.3 


2^„l 


24.9 


29.6 


2. Capital expenditure 


4.7 


9.0 


9.9 


10.0 


10.7 


9.6 


19.3 


3. Reserve additions or 
















deductions (-) 


-1.2 


.3.1 


-1.1 


-2.7 


.-A'i 


1.7 


-8.6 


TOTAL USES 


18.8 


28.9 


26.5 


26.6 


32.3 


36.2 


40.3 



a. Does not include Treasury Bills onlendings, 

b. Includes premia on oil leases. 

Co Does not include transfers to the Capital Development Fund. 



83 



Sources 



TABLE 15 

FINANCES OF THE GOVERNMENT OF WESTERN NIGERIA 

(in t millions) 

RevoEsto Estimate 

1960/1 1961/2 1962/3 1963/^ 196^/5 1965/6 1966/7 



1. Regional revenues 


^(■.5 


^•.9 


1,1 


6.0 


(^,1 


7.1 


6,9 


2, Marketing Board 


12.9 


-2.8 


9.2 


2,6 


k,\ 


2,6 


4,2 


3oDerivation allocations 


12.8 


13.1 


12.9 


10,8 


10,0 


9,8 


10.5 


'^■, Distributable Pool 
















allocations 


3.2 


3.3 


^■.0 


3.3 


^.7 


5.^ 


6,2 


5. Fed a Govt. Grants and 
















Reimbursements 


0,2 


0.2 


0.1 


0,7 


0,5 


1.1 


0,9 


6. Fed. Govt, Loans 


- 


- 


3.0 


2,0 


1,8 


1.9 


lo5 


7. External Grants and 
















Reimbursements 


0.3 


0,1 


0.1 


0.6 


0,5 


0,3 


1.1 


8 .External Loans 


33.9 


- 


0.5 
37.5 


0.^. 
26.4 


0.5 
28,8 


2.5 

30,7 


5o5 


TOTAL SOURCES 


18,8 


36c8 



Uses 



1, Recurrent expenditures 


21.1 


20,1 


20.4 


18,2 


20.2 


19.9 


21,5 


2aCapital expenditures 


13.7 


13.3 


14,4 


9.7 


8,9 


9.8 


17o9 


3. Reserve additions or 
















deductions 


-0,9 


-14.6 


, 2.7 


-1.^ 


-0,3 


1,0 


-2,6 


TOTAL USES 


33.9 


18.8 


37.5 


26,4 


28.8 


30,7 


36,8 



a. The Mid-West Region separated from the West on October 1, I963, 

b. Does not include Treasury Bills onlendings. 

c. Does not include transfers to the Capital Development Fund, 



84 



TABLE 16 

FINANCES OF THE GOVERNMENT OF MIDWESTERN NIGERIA 

(in t millions) 

Revised 



Sources 

le Regional Revenues 

2e Marketing Board 

3» Derivation allocations 

4, Distributable Pool allocations. 



5. Federal Government Grants 

and Reimbursements 

b 
6o Federal Government Loans 



External Grants and 
Reimbursements 



8„ External Loans 
TOTAL SOURCES 







Estimate 


Estimate 


1963/4^ 


196^/5 


1965/6 


1966/7 


006 


1.7 


1.5 


2.0 


- 


0.3 


0.2 


O.i^. 


2.5 


4.9 


6.1 


7.1 


0.7 


lo5 


2.2 


2.5 


— 


- 


0.2 


0.2 


1.0 


1.5 


1.1 


0.9 


: 


^^ 


2.0 


3.1 


4,8 


9.9 


13.3 


16.2 



Uses 

1. Recurrent expenditure 

2o Capital expenditure 

3. Reserve additions or 
deductions (-) 

TOTAL USES 



3A 


6.9 


7.8^- 


8.4 


- 


1.9 


3.2 


6.5 


1.4 


1.1 


2.3 


1.3 


4.8 


9e9 


13.3 


16.2 



a. The Mid-West separated from the Western Region as of October 1, 1963c 

b. Does not include Treasury Bill onlendings. 

c. Original estimate. 



85 



An indicator of the relative ability of each government to expand 
its activities would be total expenditure growth. Certain funds sources 
are quite erratic, thus presenting a base year statistical problem if 
revenue sources were used instead; Table 17 below shows the absolute and 
relative growth of expenditure for all governments. 







T 


ABLE 17 












GOVERNMENT EXPENDITURE 








196071 


1961/2 


1962/3 


1963/4 


196^/^ 


1965/6 


North; Total 
1960/3^100 


t23.7m 
100 


t28.2m 
118 


t28,3in 
119 


t30.1jn 
127 


t34oljn 
1^4- 


137 c^m 
157 


East; Total 
1960/1=100 


20.0 
100 


25.8 
129 


27.6 
138 


29.3 

lk6 


34.8 
17^' 


34.5 
172 


West & Mid-West; 

Total 

1960/1=100 


3^08 
100 


33 0^' 
96 


34.8 
100 


31.3 
90 


37o9 
109 


40.7^ 
117 


Federal; Total 
1960/1=100 


7^.2 
100 


81.4 
110 


90.1 

121 


101.8 
137 


106.1 
143 


120„7 
163 


ao Estimate 















The table above shown that since Independence, total expenditure 
has grown similarly for all governments except that of the former West- 
ern Region. The particular lack of progress on behalf of the combined 
West and Mid-West Regions may be attributed to the spectacular price 
position of its cocoa crop at Independence and its subsequent decline 
and the political unrest in the Region. 



86 



The ability of each government to finance its expenditure from 
regionally derived sources is shown in Table 18. For the regions, the 
deficit is calculated by taking the difference between sources items 
1-3 and uses items 1-2 from Tables 12-16, For the Federal Government 
the deficit is calculated by taking Federally Collected Revenue minus 
Derivation and Distributable Pool Allocations less Total Expenditure » 
During the period from I960/I to Y)GklS, regionally derived revenues 
financed 60 per cent of the North's expenditure, 68 per cent of the 
East's, and 70 per cent of the combined West - Mid-W©st expenditure. 
This would support the contention that revenue allocated by need allows 
the North to spend more than would be possible based on derivation 
alone. However, the amount of additional expenditures so made possible 
would appear to be quite small; and it would seem that in recent years 
this differential has been disappearing, possibly due to the North which 
is weak in trained manpower, being unable to increase its capital 
expenditure rapidly. 

When Distributable Pool allocations are included in revenue, the 
deficits appear as in Table 19 below. 

For the six- year period from I960/I to I965/6, the Nigerian gov- 
ernments were able to finance the following percentages of their total 
expenditure from revenues of Regional derivation and Distributable Pool 
allocations: East 92 per cent, North 87 per cent^ West - Mid-West 85 per 
cent and Federal Government 78 per cent. The Distributable Pool receipts 



87 



TABLE 18 
GOVERNMENT BUDGET DEFICITS BASED ON LOCALLY DERIVED REVENUE 

(in L millions) 



Federal 

North 

East 

West 

Mid-West 



196071 1961/2 1962/3 1963/^ 196 V 5 1965/ 



3.2 

10.7 
7o2 

^■,6 



15.6 

12.6 

4.6 

18.2 



23,2 

12.0 

8.8 

5oO 



28,8 

11,4 

9.3 

8.5 

0.3 



24.5 
11.1 
13.7 

8.3 
1.9 



29,4 

noa, 
noa, 

10,2 
3c2 



TABLE 19 

GOVERNMENT BUDGET DEFICITS AFTER DISTRIBUTABLE POOL ALLOCATIONS 

(in t millions) 





1960/1 
3.2 


1961/2 
15c6 


196273 


1963/4 


1964/5 
24,5 


196^ 


Federal 


23.2 


28,8 


29o4 


North 


5c4 


6.8 


4,6 


4.7 


0.8 


1,8 


East 


3a 


0.1 


3.7 


4.2 


0,3 


2,1 


West 


1.4 


14.9 


1.5 


5.2 


3.6 


4,8^ 


Mid-West 


- 


- 


- 


s0,4 


0,4 


1,0" 


a. Revised estimate. 












s. Indicates 


surplus . 













88 



of the Regions were the following percentages of Regionally derived 
revenues for the I960/I to 196^5 period; North ^ll per cent. East 28 per 
cent, and West - Mid-West I6 per cento It must be remembered here that 
if local government revenues other than grants from the Regions were 
included, that the differences among Regions would be substantially- 
lessened due to the relatively large local government revenues of the 
North, 

At this pointj we must consider the question of what can be use- 
fully concluded from the foregoing mass of data about the Nigerian 
financial system. The author's conclusions are listed below. 

(1) All regions have made steady progress with the revenues they 
collect since Independence, The relative Regional efforts to collect 
revenue cannot be compared without inclusion of local government revenues 
as well, 

(2) Marketing Boards have been significant^ although not 
increasing sources of funds for the Regions » The North for a combina- 
tion of political, economic, and administrative reasons has thus far 

Q 

lagged behind the other regions in tapping this source of finance » 

(3) The Distributable Pool established by the Raisman Fiscal 
Review Commission has, by using criteria other than derivation, allowed 



— — — — g — - — ' — 

It should be noted that the large i/lo7m loan planned for I966/7 
from the Northern Nigeria Marketing Board to the Northern Nigeria Gov- 
ernment is the result of the repatriation of the Board's overseas assets 
rather than an allocation from current operations o 



89 



the North to finance perhaps 10 per cent more expenditure and the West - 
Mid-West perhaps 10 per cent less expenditure than would be the case 
with a revenue allocation system based solely on derivation^ This con- 
clusion depends on the assumptions; (a) that the derivation allocations 
now used are not inaccurate and biased against any region(s) and (b) 
that the revenue sources used for the Distributable Pool or for the 
Federal Government revenue are distributed in roughly the same pattern 
as the other revenues,, both Regionally and Federally collected , that are 
retained on the principle of derivation by the Regional Governments » 

{k) Combined Regional revenues (items 1-^ in Tables 13-16) have 
grown faster since Independence than has net Federal recurrent revenue. 





Combined Regional 
Revenues 


Net Federal 
Revenues 


1960/1 


L 68.6m 


L 71»0m 


1961/2 


65.6 


65o8 


1962/3 


81. i^ 


66,9 


1963/^ 


77.0 


73.0 


196^/5 


96,2 


82.6 


Provisional I965/6 


99c9 


91.3 


Estimate 1966/? 


117.1 


102.6 



(5) The largest sources of Regional revenue growth have been 
Distributable Pool and Regionally collected revenues. The former has 



90 



been of special benefit to the North, and to a lesser extent the East, 
in assisting the rapid growth of their expenditures. Its growth has 
also made nonderivation criteria of revenue allocation more significant 
in the recent years than they were at Independence, 

(6) The West has been most sorely in need of funds to finance 
expenditure in recent years » This has resulted primarily from its low 
share of the Distributable Pool, lower Marketing Board contributions due 
to the exhaustion of its financial reserves and low cocoa prices, and 
lack of growth in derivation allocations, again largely due to low cocoa 
prices o 

(?) The North and probably the East have been able to increase 
their expenditures in line with their administrative capacity to under- 
take new capital projects. The West had to hold a tight rein on new 
expenditure. The Federal Government has found ad hoc ways of financing 
rapid expenditure increases other than through its modest revenue 
increases. This is largely the result of legal and administrative 
advantages a central government has and regional governments do not have 
in a federal system. 

The remainder of this section will be occupied with two problems 2 
first, evaluation of the effectiveness of the fiscal review system; and 
second, examination of the allocation of the additional funds sources 
not covered by the statutory system discussed above. 



91 



The institutionalization of the Fiscal Review Commission by the 
Nigerian Constitution has tended to remove the concept of such a com- 
mission above criticism. Yet the use of such commissions may be on 
balance undesirable c Foremost among the objections to commissions 
formed of expatriate experts as has been the case to date is their 
unfamiliarity with Nigeria and the impossibility of accomplishing their 
task in the short period which they have to sift voluminous and often 
inconsistent data bearing on the revenue allocation problem „ That such 
hurried proceedings can lead to appropriate recommendations may be 
doubtfulo Secondly, the Fiscal Review Commission process is lengthy in 
the time spent from the agreement on the Commission's terms of reference 
to enactment or other disposition of the Commission's recommendations o 
Basic financial conditions may have changed before the Commission's 
recommendations can be put into effects Lack of short-run responsive- 
ness is therefore another criticism of the Fiscal Review Commissiono 
Thirdly, the recommendations of the Commission depend basically upon 
political decisions on priorities or criteria which in practice the Fis- 
cal Review Commission is forced to make. This selection among principles 
of revenue allocation, which have been discussed previously, depends on 
political preferences, not on any absolutes. Popularly chosen public 
representatives might be better suited to act on such questions than 
expatriate experts o Fourthly, it might be argued that the modifications 
past Commissions have made to divert the revenue allocation system from 



92 



complete dependence on the principle of derivation have been so minor as 
to be relatively unimportant. 

While criticisms of the Fiscal Review Commission system are just- 
ified, they may ignore political considerations peculiar to the Nigerian 
situation which can make such exercises a fundamental part of keeping 
revenue allocation from becoming an issue which can provoke national 
disunity. Transferring the issue of fiscal review from the political 
arena to the technical may avoid calamitous interregional bickeringo It 
is possible that no indigenous group could reach recommendations which 
could be accepted by all governments of the Federation as being impar- 
tial as can be the recommendations of a commission of disinterested 
expatriate financial experts. The lack of short- run responsiveness 
built into the Fiscal Review Commission system will not be important if 
other ad hoc mechanisms present for revenue allocation are available. 
Finally, the fact of having a firmly institutionalized process for 
deliberating over changes in the revenue allocation system may serve to 
eliminate procedural conflicts which could prove divisive. 

Although we may find that use of Fiscal Review Commissions has 
been on balance desirable in Nigeria, we must examine the contention that 
the really significant variation of federal and regional revenue shares 
occurs through the many ad hoc decisions reached on revenue matters not 
rigidly defined by the Constitution and that Fiscal Review Commissions 
amount to only a shadow play. Ad hoc decisions may make needed short-run 



93 



revenue allocation adjustments, compensate for obvious errors in Fiscal 
Review Commission recommendations, or be used to reflect the balance of 
political or civil service power. 

The ad hoc measures used that may alter the actual revenue allo- 
cation among the Federal and Regional governments from that prescribed 
in the Constitution may be summarized under the following categories; 
Federal Government grants p reimbursements and loans to the Regions, 
Development Loan allocations. Treasury Bill allocations, external aid 
allocations, and changes in the balances in the Other Governments 
Clearance Fund, Other items might be included but have been considered 
negligible in effect. It must be remembered that in addition to these 
ad hoc allocations which may change the pattern of funds source distrib- 
ution, governments can finance additional expenditure through the draw- 
ing down of asset holdings. 

Table 20 below shows the impact of the ad hoc allocations on the 
finances of each of the Federation governments „ A minus sign designates 
a reduction in the funds available to a government. We find that to the 
1.939m of statutorily allocated revenue received by the governments of 
the Federation from I960/I to I965/6, a net total of £,171m additional 
has been allocated by ad hoc means » Table 21 below shows the distribu- 
tion of the statutory and ad hoc allocations among the governments. 



9A». 



TABLE 20 
AD HOC FINANCE SOURCES 
(in i. millions) 



Key to columns s 



1 = Federal Government Grants ^ Reimbursements and Loans 

2 = Development Loans 

3 = Treasury Bills 
h - External Aid 

5 = Other Governments Clearance Fund 

6 = Total 

Negative sign indicates a reduction in the finance sources 
available to a government. 



Federal 
Government 

1960/1 -0,7 1,7 9cO 10o5 

1961/2 -0,7 7c0 0,2 6,8 

1962/3 -0,5 7,0 4,5 5o6 

1963/4 -4,1 12,0 5o8 1,0 

1964/5 -3o3 6,9 6,8 2,0 

1965/6 _-4,_l 8,7 _io7 llo9 

Total -13c4 43c3 32.0 37=8 

North 

1960/1 0,3 6,6 

1961/2 0,3 - 4,0 

1962/3 0.4 3oO -3o2 

1963/4 2,1 3cO 1,2 

1964/5 2,7 2,7 -O08 

1965/6 2,0 - -1,2 

Total 7o8 15,3 



- 


20,5 


a,2 


12,1 


3.9 


20,5 


4.7 


19.4 


3.6 


160O 


■io5 


20,7 


9,5 


109.2 



2,4 


- 


9c.3 


0.2 


0,1 


4,6 


0,4 


-0,5 


0,1 


0,At 


-0,3 


6,4 


0,4 


-4o0 


1,0 


0._4 


0,8 


„2c.O 


4,2 


-3«9 


23 c 4 



TABLE 20 (Continued) 



95 



East 
1960/1 


0.2 


1961/2 


0,2 


1962/3 


- 


1963/4 


1.3 


1964/5 


0.1 


1965/6 


0.8 


Total 


2.6 



1.7 

2.0 
2„0 
2.1 
2.1 
9.9 



0.5 

■0.5 



1.7 
1.3 
0.6 
0.2 
1.0 

0.6 
5.4 





3o6 


- 


1.5 


"1.9 


0,7 


•2.2 


1.8 


2,7 


5o^- 


■1.9 


1.6 


■3.3 


14.6 



West 



1960/1 


0,2 


- 


- 


0.3 


- 


0.5 


1961/2 


0.2 


_ 


3.0 


0.1 


1.1 


4,4 


1962/3 


0.1 


3.0 


2.0 


0„6 


-1.5 


4,2 


1963/4 


0.7 


2.0 


0.5 


1.0 


-2,0 


2,2 


1964/5 


0.5 


1.8 


-1.0 


1,0 


-0.7 


1,6 


1965/6 


1.1 


2.1 


-2.5 


2,8 


2.7 


6o2 


Total 


2.8 


8.9 


2.0 


5.8 


-0.4 


19.. 1 


md-West 














1963/4 


- 


1.0 


0.5 


- 


-0,2 


1.3 


1964/5 


- 


lo5 


0,5 


- 


-1.6 


0.4 


1965/6 


0,2 


1.1 


- 


2„0 


~ 


3.3 


Total 


0„2 


3.6 


1.0 


2.0 


-1,8 


5.0 


GRAND TOTAL 


_ 


81.0 


35.0 


55.2 


- 


171.2 



Note: The accuracy of many of the individual entries above is doubtful 
because of inconsistencies between Federal and Regional statistics „ 
incomplete breakdowns of data, etc. Therefore, handle conclusions with 
care. 



96 



TABLE 21 

FUNDS ALLOCATIONS AMONG NIGERIAN GOVERNMENTS 

1960/1 TO 1965/6 



Statutory 
Sources 


Ad Hoc 
Sources 


Total 
Sources 


Ad Hoc Sources 
Without the Other 

Governments 
Clearance Fund 


Federal Government h8% 


6^^ 


515^ 


58^ 


North 17^ 


1^5^ 


16^ 


165^ 


East 165? 


8i 


15^ 


11^ 


West/Mid-West 195^ 


m^ 


18^ 


15^ 


1005? 


1005^ 


1005^ 


100^ 



97 



Several conclusions emerge from the data on ad hoc allocations s 

(1) The Federal Government is able to use its power, prerogatives, 
and prestige as the national government to significantly increase its 
share of the total finance sources available to all the governments of 
the Federation,, Whether this results from its just expenditure require- 
ments or is a devious adjustment of the Fiscal Review Commission's 
adopted recommendations is problematical. 

(2) The allocation of finance sources among the regions is not 
significantly altered by the ad hoc allocations. Table 22 below shows 
the allocations among the regions before and after the Distributable 
Pool allocations and after the ad hoc allocations, 

TABLE 22 

FINANCE SOURCE ALLOCATIONS AMONG REGIONS 

1960/1 to 1964/5 



Before Distributable After Distributable After Ad Hoc 
Pool Allocations Pool Allocations Allocations 



North 


28^ 


3256 


33^ 


East 


31^ 


31^ 


30^ 


West/Mid-West 


^1^ 


Jli 


J?i 



100^ 1005? 1005^ 



98 



(3) There has been no trend evident in the Federal Government's 
share of ad hoc allocations » There seems to be no correlation between 
the share of the ad hoc allocations that the Federal Government manages 
to take for itself and the size of the Federal Government's budgetary- 
deficits exclusive of the ad hoc allocations, 

(4) Allocations among the Regions vary greatly and appear to be 
very responsive to the immediate financial needs of the Regions e From 
1960/1 to 1965/6 there have been eight annual total ad hoc allocations 
to individual regional budgets which have exeeeded LJm and eight 
regional budgetary deficits in the same period which have exceeded i»3m 
(based on Table 21) o Six of the large deficits and large allocations 
have coincided o The size of the total annual ad hoc allocations to a 
Regional Government may be largely determined by the size of its 
deficit between constitutionally allocated revenues and expected 
expenditure. 

(5) There is no analysis attempted here of the comparative terms 
of the ad hoc allocations received by the various governments. It might 
be found that the North has received a larger share of grants than loans 
compared to the other governments and has also done especially well in 
securing soft- term external loans. 

In summary, we may conclude that the Fiscal Review Commissions 
provided for in the Nigerian Constitution have assisted the North's fin- 
ancial position somewhat at the expense of the West's by making statutory 



99 



revenue allocations partly on the basis of criteria other than deriva- 
tion <> However, derivation remains the primary determinant of the 
statutory allocation at present. In contrast, the ad hoc financial 
allocations have done little to alter the relative Regional positions 
but have favored the Federal Government over the Regions » However „ the 
division of the ad hoc allocations bet-ween the Federal Government and 
the Regions would approach the statutory allocation division if Treasury 
Bill proceeds were made available to the Regions on a long-term basis 
rather than being almost wholly retained by the Federal Governmento 

IVo An Overview 

The successful operation of the Nigerian intergovernmental finan- 
cial system after Independence was characterized by a flexibility in 
meeting short-run financial requirements of the governments and multiple 
opportunities to obtain nonconstitutional allocations of finances o This 
flexibility of the system was framed by the stability of having the main 
pattern of revenue distribution specified in the Constitution and subject 
to long-term reviewo The flexibility and diversity of the system are 
derived from the large number of ad hoc decisions which must be made 
almost continuously concerning finance sources for which a precise allo- 
cation is not specified in the Constitutiono Thus far, financial diffi- 
culties on the part of any of the Federation Governments have been 



100 



relieved by making additional funds available through one of a number of 
wayso Political pressure pver the main means of revenue allocation has 
been kept to a minimum through the multiple opportunities available to 
obtain supplementary finances e Lack of success in obtaining a larger 
share of Development Loans „ foe example, does not preclude hope of 
obtaining a larger share of Development Loans ^ for example, does not 
preclude hope of obtaining larger grants from the Federal Government, 
more foreign aid in its place, or larger allocations of Treasury Bills o 
Previous Txrrongs can always be expected to be adjusted through the next 
Fiscal Review Commission, 

The Nigerian public finance system resembles a living organism, 
adjusting behavior to stimuli and the results of its own past behavior o 
The allocation of the I965/66 Development Loan is one example „ Favor- 
able revenue results in the past two years and a limited administrative 
capacity to expand capital expenditure led the Northern government to 
return its "normal" share, which was partially used to increase the 
allocations to the other Federation governments and partly to reduce the 
total amount of internal borrowing required that yearo A further 
example would be the balances in the Other Governments Clearance Fund, 
The Federal Government has a much lower balance owed to the West than to 
the other regional governments, largely as a result of the recent weak 
financial position of the Western Regional Governmento 



101 



The Nigerian public finance system might also be described as a 
complex series of feedback loans which determine behavior and may lead 
to stable or unstable characteristics of the system,, Certainly an 
Industrial Dynamics type study of the system might explain much of the 
behavior that can be observed « Here several simple feedback loops might 
be used to describe the system^ 



Political 
Power 




Allocation 
Criteria 



Allocation 
Decision 



Budget 
Performance 




-> — \ Revenue): 






Expenditure 



Administrative) 
Capacity 5 etc.f 



We should also note that the delays in the system between various deci- 
sions and events will play an important role in determining its 
characteristics » 

An example of how the system would operate might be as follows; 
A region receives a large revenue allocation due to its alleged "needo" 
However J for administrative reasons it may not be able to expand its 



102 



expenditure rapidly enough to fully utilize the new revenue o The 
resulting budget surplus might cast doubt as to its real "need" and 
lessen its requirements for additional allocations from ad hoc sources „ 
Consequently, the total finances made available to the government might 
be considerably less than might have been expected from the original 
revenue allocationo 

The Nigerian public finance system has shown an excellent ability 
to survive through small adjustments. Whether it can respond to basic 
shifts in political power such as occurred in Nigeria in I966 or could 
malce a major departure from the criterion of derivation in order to make 
a major attack on the imbalance in development between the North and the 
other regions, if this were judged desirable, remains to be seen. 



Date Due -» 



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MAY 5 '84 



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